Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

MILLPORT PIERS (AMENDMENT) ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to Millport Piers (Amendment), presented by Mr. James Stuart, and ordered (under Section 7 of the Act) to be considered tomorrow, and to be printed. [Bill 161.]

Oral Answers to Questions — SCOTLAND

Forth Road Crossing

Sir W. Ansthruther-Gray: asked the Secretary of State for Scotland whether he is now in a position to make a statement about the Forth road crossing.

The Secretary of State for Scotland (Mr. James Stuart): I regret that I am unable to add at present to the reply which I gave on 19th June to the hon. and gallant Member for Perth and East Perthshire (Sir A. Gomme-Duncan).

Sir W. Anstruther-Gray: When does my right hon. Friend expect to have another meeting with the Forth Bridge Board, because that is the next step, is it not?

Mr. Stuart: The present step, apart from the next step, is the discussions which are at present continuing with the authorities concerned.

Mr. Woodburn: Is the right hon. Gentleman, in the meantime, pending his final decision, taking steps to see that the necessary preliminaries are continued with the roads, etc., on the approach to the bridge?

Mr. Stuart: All these matters are at present under close examination.

Nurses (Holiday Pay)

Mr. Nairn: asked the Secretary of State for Scotland if he will issue a circular to regional hospital boards directing them to allow nurses to draw holiday pay in advance.

Mr. J. Stuart: Hospital authorities have discretion to make reasonable advances of pay to nurses going on annual leave. I do not think it would be appropriate for me to issue a directive on a matter of this kind.

Mr. Nairn: Would not my right hon. Friend agree that members of the nursing profession need and deserve holiday pay in advance probably more than the members of any other profession? If he agrees, would he then encourage hospital boards to grant holiday pay to nurses before their holidays?

Mr. Stuart: Hospital authorities have discretion. They have been well aware of the position since 1951, when they were so informed.

Miss Herbison: Might it not help hospital boards to do what the hon. Gentleman is asking if the Secretary of State were to send out a circular? Teachers have their holiday pay in advance, and have had for a long time.

Mr. Stuart: One must leave some discretion to the authorities. It is not that I am opposed to the hon. Lady's suggestion.

Slum Clearance Proposals, Caithness

Sir D. Robertson: asked the Secretary of State for Scotland why, in view of the magnitude of the problem, he approved slum clearance proposals by Caithness County Council for the three years to 31st December, 1958, at the lowest demolition rate and lowest new building rate of all 33 Scottish counties.

Mr. J. Stuart: The council proposes to build 120 houses for rehousing purposes for the three years in question, representing an increase from 33 to 40 houses a year in its average rate of building since the war. The county is remote; building is normally on scattered sites; and there are demands on the local building


resources for other urgent purposes. In all the circumstances, the proposals were approved as being not unreasonable.

Sir D. Robertson: Will my right hon. Friend take another very serious look at this matter, because his Answer just will not do? Does he realise that it means that at least half of the people who live in these dilapidated houses are never likely to get a decent home in their lifetime? Does he also realise that the Burgh of Wick and the Burgh of Thurso are subject to the same difficulties about labour but are managing to tackle the problem within two or three years, instead of the 40 or 50 years suggested by the Question?

Mr. Stuart: I was dealing with Caithness County and not with the burghs, where the work is not so remote or difficult. The houses built by Caithness County compare favourably so far with the work done by other remote authorities. If it is shown that more can be undertaken, I expect the council will do so.

Milk (Price Review)

Captain Duncan: asked the Secretary of State for Scotland whether, as next spring's milk is now in course of preparation in the cow, he will give an assurance that there will be no reduction in the standard quantity of milk, in the next Price Review, which is to be produced in Scotland.

Mr. J. Stuart: This is a matter which must be left to the next Annual Review, when all relevant factors can be considered.

Captain Duncan: Is my right hon. Friend not aware that there are discussions on long-term assurances now going on between the Government and the farmers' representatives? Is this one of the subjects which will be discussed? Can an announcement be made before next spring, because then it will be too late?

Mr. Stuart: I am afraid it is too early at this stage to say what progress may be made with these discussions, but I will certainly bear the point in mind.

Rabbits

Captain Duncan: asked the Secretary of State for Scotland if he will make a statement on the present situation regard-

ing rabbit extermination in Scotland; and what new measures he has under consideration to prevent their increasing again.

Mr. J. Stuart: All areas of Scotland have been affected by myxomatosis. Nearly two-thirds of the total land area has been designated as rabbit clearance areas. It is too early to assess the results of the campaign so far. At the present the survivors of myxomatosis are undoubtedly multiplying rapidly in some places. I am not considering any new measures, but it is clear that an intensified application of the present measures will be needed once the crops are harvested and natural cover dies back. Meantime efforts to eliminate rabbits should not be abated.

Captain Duncan: Has my right hon. Friend heard of the suggestion made by the farmers' representatives in Scotland that a myxomatosis bank should be kept by the Government and used to re-spread the disease in order to keep rabbits down? Even if that would mean introducing legislation, will my right hon. Friend consider it?

Mr. Stuart: I have indeed heard of the suggestion, but I must point out to my hon. and gallant Friend that the Advisory Committee on Myxomatosis has advised against it.

Bulls (Tuberculosis Testing)

Captain Duncan: asked the Secretary of State for Scotland whether he re-tests all bulls each year for tuberculosis before they are lent to crofting townships which are 100 per cent. tubercular tested.

Mr. J. Stuart: Yes, Sir. All such bulls are tested before being sent out.

Captain Duncan: Is my right hon. Friend aware that in a 100 per cent. T.T. crofting county, when the test took place, last autumn, the only animal to go down in the test was the Government bull?

Police (Arbitration Award)

Miss Herbison: asked the Secretary of State for Scotland what decision he has reached as a result of his consideration of methods of implementing the recommendation of the Police Arbitration Tribunal given on 31st May, 1956, that the award of 14th December, 1955, should be retrospective to 8th September, 1955.

Mr. J. Stuart: I would refer the hon. Member to the reply given to similar Questions by my right hon. Friend the Secretary of State for the Home Department on 5th July.

Miss Herbison: Has the Secretary of State no answer to give for himself on this question? Is he aware that his attitude and that of his right hon. and gallant Friend is regarded as most reprehensible throughout the whole country? Is he also aware that if there is need for legislation before the police can have justice, all of us on this side of the House would be most willing to expedite that legislation?

Mr. Stuart: In this respect I am in the same position as the Home Secretary and, therefore, my Answer is the same. Consideration is being given to how we should deal with future awards. As I think hon. Members know, legislation would be necessary, and we are well advanced in the present Session.

Land Drainage

Sir W. Anstruther-Gray: asked the Secretary of State for Scotland whether he is now in a position to make an announcement with regard to land drainage in Scotland.

Mr. J. Stuart: Discussions with those concerned are still continuing, but I regret that I am not yet in a position to make a statement on this matter.

Sir W. Anstruther-Gray: Will my right hon. Friend bear in mind that it would be a good plan to get on with this matter of land drainage without delay?

Linn of Dee—Spey Valley (Proposed Road)

Mr. Spence: asked the Secretary of State for Scotland if he will have a fresh inquiry made as to the estimated cost and best route of a road, suitable for light modern transport, linking the Linn of Dee with the Spey Valley.

Mr. J. Stuart: An inquiry into this proposal would be a matter for the local authorities concerned and in present circumstances I do not think I would be justified in asking them to undertake it.

Mr. Spence: Is my right hon. Friend aware that there is a rapidly changing climate of opinion on this question? Is

he further aware that the old proposed routes which were surveyed are not now the best and cheapest, having regard to modern methods of road construction? Before my right hon. Friend finally decides against having this survey made, will he please read the fourth leader in The Times today?

Local Authority Houses (Rents)

Mr. Hamilton: asked the Secretary of State for Scotland whether, as a contribution to achieving stability in prices, he will circularise local authorities advising them to implement a rent-freeze policy for the next 12 months.

Mr. J. Stuart: I sent local authorities a circular on 30th June containing information which I hope will help them when reviewing the rents of their houses, but it is for the local authorities themselves to decide what rents should be charged. I would not feel justified in issuing another circular on the lines suggested by the hon. Member.

Mr. Hamilton: Even the right hon. Gentleman would scarcely claim that his circular advocates anything like a rent freeze. Would he not agree that it is not more economically unsound to freeze rents than to freeze the price of goods obtained through the nationalised industries? How can the Government expect wage restraint simply by freezing those prices whilst at the same time the right hon. Gentleman is doing all he can to put up rents?

Mr. Stuart: We discussed this subject this morning in the Scottish Grand Committee. In the figures I can supply to the hon. Member, rent has lagged behind other earnings.

Mr. Hamilton: asked the Secretary of State for Scotland why the initial announcement on the major change in policy concerning council house rents was not made in the House of Commons; and whether he will give an assurance that future statements of changes in Governmental policy, in so far as they affect Scotland, will be made initially in the House of Commons.

Mr. J. Stuart: I indicated in the statement which I made in the House on 27th October last that the level of council house rents is low and could without hardship be raised if the available housing


subsidies were pooled. The circular which I recently issued to local authorities does not involve any change in this view. It contains information which may be useful to authorities in reviewing and fixing the rents, statutory responsibility for which rests on the authorities themselves. I can certainly assure the hon. Member that statements of important changes in Government policy will continue to be made in Parliament.

Mr. Hamilton: Would the right hon. Gentleman not agree that the circular which he has issued to local authorities is much more than a recommendation? Will he indicate when he announced in this House the recent decision to increase the price of school meals, and the proposal to get on with the Forth road bridge, and when he made similar announcements which are causing considerable concern in the country, and about which Members of Parliament are the last people consulted or informed?

Mr. Stuart: I do not think that this Question deals with school meals, but the Chancellor of the Exchequer stated that in the House. I made a statement on 27th October last year in relation to the announcement about which the hon. Member has questioned me.

Garage, Shotts (Loan Sanction Application)

Miss Herbison: asked the Secretary of State for Scotland when Lanark County Council will be given loan sanction approval to its scheme for a garage for the scavenging district of Shotts.

Mr. J. Stuart: I propose to reconsider the county council's application for loan sanction in September in the light of the restrictions on local government expenditure.

Miss Herbison: Surely the Minister should reconsider this matter before September. Is he not aware that it is not only in that district but in many places in Lanarkshire that the men doing this most important and useful job feel that they ought to have better facilities and, indeed, that they have none at the present time?

Mr. Stuart: I am not denying the desirability of the project at all. I am

merely suggesting that it is not immediately essential. At the county council's request, a meeting is being held this month to discuss the question of garage accommodation in the county generally.

Miss Herbison: Would the Minister not consider putting some restrictions on building by private people because, wherever we look, public building is being restricted by the Government and all sorts of other building is going on?

Mr. Stuart: I am afraid that I cannot add, in answer to a question, to what I have said about it.

Mental Illness and Mental Deficiency

Mr. J. Taylor: asked the Secretary of State for Scotland if he will make a statement on the present state of the discussions and negotiations about the proposals to amend the law relating to mental illness and mental deficiency in Scotland, as outlined in Command Paper No. 9623.

Mr. J. Stuart: So far I have received observations from only two bodies. I think that most of the bodies interested will require some time yet in order to give full consideration to these proposals.

Mr. Taylor: Will the Secretary of State, when he gives further consideration to the proposals, bear in mind that there are very serious misgivings, particularly about the proposals for recommended patients, and will he give the house an opportunity, before presenting any legislation on this matter, to discuss and consider the proposals?

Mr. Stuart: I will bear in mind what the hon. Gentleman has said.

Secretaries, Scottish Office (Salaries)

Mr. Hoy: asked the Secretary of State for Scotland what changes have been made in the salary scales of the permanent secretaries at the Scottish Office; and how many are affected.

Mr. J. Stuart: In accordance with the recommendations of the Royal Commission, which have been applied to the Civil Service from 1st July, the new rate of pay of the Permanent Under-Secretary of State is £6,000 per annum, and that of the Secretaries of my four Departments £4,200 per annum.

Mr. Hoy: May I ask the right hon. Gentleman if, in addition to these salaries, his officials have travelling allowances and allowances for living in London?

Mr. Stuart: They certainly have the normal travelling allowance, but I should like to give a further answer on any other point later.

Housing Subsidies

Mrs. Mann: asked the Secretary of State for Scotland if he is now in a position to state what changes will be made in the Scottish subsidies for housing under general needs.

Mr. J. Stuart: I hope to make a statement on this subject before the Recess.

Mrs. Mann: Can the right hon. Gentleman say what tentative figure was arrived at in regard to the reduction of the subsidy for general needs when he was discussing this question with the local authorities?

Mr. Stuart: No tentative figure was arrived at. As I said this morning, in the Scottish Grand Committee, I made certain suggestions to the local authorities which they are now considering.

Mr. Woodburn: If the local authorities have any comments to make when they do consider the suggestions, will any attention be paid to those comments, or will the suggestions made by the Secretary of State be carried through, irrespective of what the local authorities say?

Mr. Stuart: I should not ask for comments if I did not want to hear them.

Accidents in the Home

Mrs. Mann: asked the Secretary of State for Scotland if he will state the annual cost to the National Health Service of the treatment of accidents in the home.

Mr. J. Stuart: I regret that this information is not available.

Mrs. Mann: Is it not rather a dreadful reply, as accidents in the home are the greatest factor in our hospital service, that the figure is never available? When are we to get these accidents made notifiable?

Mr. Stuart: The fact is that a person injured at home may be treated by his

family doctor or as an out-patient or an in-patient in a hospital, and it would be very difficult to separate these from all the other cases.

Mrs. Mann: Is the right hon. Gentleman aware that this is exactly the same reply that was given before road accidents were made notifiable?

Mr. Stuart: No, the number of accidents is, I think, known. I thought that the hon. Lady was asking about the cost to the National Health Service.

Mrs. Mann: asked the Secretary of State for Scotland the number of deaths from accidents in the home in the four cities of Scotland and recent available annual figures.

Mr. J. Stuart: The most recent available information relates to 1955. I am circulating in the OFFICIAL REPORT figures for the four cities for that year and for each of the two preceding years.

Captain Duncan: Can my right hon. Friend say how he gets these figures? Are they collected by the Inter-Departmental Committee which has been sitting for a long time, because these accidents are not notifiable?

Mr. Stuart: I believe that they come from the local authorities or the hospitals, but I do not know. I will find out.

Following are the figures:


NUMBER OF DEATHS FROM ACCIDENTS IN THE HOME


—
Glasgow
Edinburgh
Dundee
Aberdeen


1955
…
239
127
67
39


1954
…
246
109
64
38


1953
…
232
124
65
45

Electricity Supply, Caithness and Sutherland

Sir D. Robertson: asked the Secretary of State for Scotland if he is aware that the North of Scotland Hydro-Electric Board is not providing supplies of electricity to meet the demands of ordinary consumers in a number of agricultural areas in Caithness and Sutherland, and that the Board has given the Government's directive to cut capital expenditure on distribution by £300,000 in the current year as its reason for failing in its statutory duty; and what action he proposes to take in the matter.

Mr. J. Stuart: I am informed by the Board that already over 90 per cent. of the potential consumers in Caithness and Sutherland have been connected, including 278 in 1956 up to the end of May. The supply of electricity in any particular area is a matter for the Board and must be governed by its financial position as well as by the Government's request to reduce capital expenditure.

Mr. John MacLeod: Is the Secretary of State aware that the Hydro-Electric Board is now asking exorbitant capital charges for taking electricity to these remote areas? Surely that is not a correct interpretation of the 1943 Act.

Mr. Stuart: I would remind my hon. Friend that the Board, by statute, is required to balance its budget. The charges are entirely a matter for the Board.

Sir D. Robertson: Is it not also a fact that one of the statutory obligations of the Board is to bring electric light and power to the ordinary people, including those in the remote areas? Is it not within my right hon. Friend's knowledge that the moment that the credit squeeze occurred all distribution to those areas stopped, and will he take steps to see that the Act of Parliament passed by the House is carried out?

Mr. Stuart: I think that it is very creditable that over 90 per cent. of the potential consumers have been connected.

Mr. Woodburn: Is the Secretary of State aware that there are some complaints that he has not carried out the promise made in the Crofters Act to give, to crofters who are anxious to put in electricity, Government assistance in order to meet the obstacle of capital charges?

Mr. Stuart: I was not aware of that. As I have said, the Board is responsible for balancing its budget and it must, of course, make charges accordingly.

Herring Fishing, Wick

Sir D. Robertson: asked the Secretary of State for Scotland if he is aware that herring fishing from Wick by local craft has come to an end during the years of Herring Industry Board control; if he is satisfied with the situation, having

regard to the fact that Wick was formerly one of the largest herring ports in Europe; and what action he is taking in the matter.

Mr. J. Stuart: I am aware that, for several years, the Wick fishermen have apparently preferred to catch other kinds of fish. I cannot accept the suggestion that the responsibility for this rests with the Herring Industry Board. The Board seeks by any practicable means to encourage herring fishing from Wick as elsewhere. Its first oil and meal factory was built at Wick, and last year the Board hired a drifter to explore the Hoy grounds.

Sir D. Robertson: Is it possible that the Secretary of State is satisfied that, within the 18 years' existence of this Board which was formed to rehabilitate the herring industry, this industry has been brought to a complete end in my constituency, where it was once the greatest in Scotland?

Mr. Stuart: As I have indicated, the fishermen have decided that they would do better in other ways, just as has happened in my own constituency, and I cannot order them to fish for herring.

New Potatoes (Marketing)

Mr. Emrys Hughes: asked the Secretary of State for Scotland if he will set up a committee to inquire into the causes of the reecnt heavy losses sustained by early potato growers and to make proposals for a long term policy for Scottish early potato growers.

Mr. J. Stuart: No, Sir. The Potato Marketing Board has already met officials about the marketing of new potatoes, and a further meeting with my right hon. Friend the Minister of Agriculture, Fisheries and Food, with whom I have a joint interest in these matters, is to be held as soon as possible.

Mr. Hughes: Does the Secretary of State not realise that this is the second year in succession in which there have been very heavy losses incurred by the early potato growers, that the late potato growers are also affected, and that the farmers of Ayrshire are as disgusted with him as are the fishermen of Caithness?

Mr. Stuart: That is very regrettable.

Oral Answers to Questions — EDUCATION, SCOTLAND

University Students (Awards)

Mr. Hector Hughes: asked the Secretary of State for Scotland if he is aware that substantial differences exist between the grants to Scottish and English university students whose family and financial circumstances are otherwise identical; that these differences are to the disadvantage of the Scottish students; the justification for these differences to the disadvantage of Scottish students; and if he will now take steps to improve the grants to Scottish students so as to rectify this and give them equality of opportunity with English students.

Mr. J. Stuart: I am aware of the differences to which the hon. and learned Member refers, but I am satisfied that the awards made by Scottish education authorities are sufficient to fulfil their statutory purpose of enabling students to take advantage, without financial hardship to themselves or their parents, of any educational facilities available to them.

Mr. Hughes: Is it not unfair that these disparities should exist? Is it not a fact that representatives of both Aberdeen and Edinburgh Universities asked the reason, and that each of them was given a different reason? Will not the Secretary of State take courage, and see that equality of treatment is meted out to the students in both countries?

Mr. Stuart: These disparities have existed between England and Scotland over the years. These rates are periodically reviewed and will be reviewed again.

Lady Tweedsmuir: What about the particular position of Scottish law students?

Mr. Stuart: I would ask my noble Friend to be good enough to put a separate Question to me on that subject.

School Building (Cost Control)

Mr. Patrick Maitland: asked the Secretary of State for Scotland whether he will set up a cost investigation court in the Scottish Education Department to check on undue expense in achieving elegance in school building as in the earliest plans for Kirktonholme School, East Kilbride, and on extravagance of design as with the £550 mural at Duncanrigg Secondary School, also in the new town.

Mr. J. Stuart: I am satisfied that the existing system of control of cost of school building makes additional machinery such as my hon. Friend suggests unnecessary.

Mr. Maitland: In thanking my right hon. Friend for that reply, may I ask whether he is aware of what went on at Duncanrigg School, where about £550 was spent on a fantastic mural? Is he aware of the delay elsewhere, and is he satisfied that education is not being sacrificed to the aesthetic whims of a whole lot of officials.

Mr. Stuart: A simple and effective check upon costs is achieved by the permitted maximum per sq. ft. Within that maximum, education authorities have freedom to plan or design whatever they may think to be the best.

School Meals

Mr. Hamilton: asked the Secretary of State for Scotland the estimated saving expected from the proposed increases in the prices of school meals.

Mr. J. Stuart: The annual saving expected in expenditure on school meals is £230,000.

Mr. Hamilton: Is the right hon. Gentleman aware that the Report of the Royal Commission on the Taxation of Profits and Income, the Chancellor of the Exchequer and all informed opinion contends that the people most in need of help today are those with families of small children? How does the right hon. Gentleman reconcile that with the policy of increasing the price of school meals?

Mr. Stuart: It is precisely the policy which was followed by the Government of the party of the hon. Member before the present Government, that is, to charge the price of the food.

Oral Answers to Questions — MINISTRY OF WORKS

Office Accommodation, Edinburgh

Mr. Willis: asked the Minister of Works to what use it is intended to put the office accommodation at Sighthill, Edinburgh, when it is vacated by the Ministry of Pensions Central Pensions Branch.

The Minister of Works (Mr. P. G. T. Buchan-Hepburn): I think the hon. Member is referring to Saughton and not Sighthill. Any space which may be vacated will be made available to Departments now housed elsewhere in Edinburgh in accommodation which is either unsatisfactory or is held on short tenancy.

Mr. Willis: Will the right hon. Gentleman get in touch with the other Departments quickly to tell them that there is this space available, because we are anxious that some other Government work shall come to Edinburgh in place of the Government work that is leaving?

Mr. Buchan-Hepburn: The other Government Departments are well aware of that.

Northumberland House

Sir F. Medlicott: asked the Minister of Works why a Government Department continues to occupy one of the largest hotel buildings in London, namely, the Victoria Hotel; and if he will make arrangements for the staff now using this building to be transferred to more suitable premises on the outskirts of London and for this building to be restored to its proper function as a hotel.

Mr. Buchan-Hepburn: The Victoria Hotel, now known as Northumberland House, forms an essential part of the War Office's headquarters in the Whitehall area. It has been Government property since 1950, when the owners sold the freehold to the Government. My right hon. Friend the Secretary of State for War is of opinion that it would not be practicable to have the staffs located on the outskirts of London.

Sir F. Medlicott: Bearing in mind the great shortage of hotel accommodation in central London, would my right hon. Friend give an assurance that, broadly speaking, at least every effort will be made to prevent that kind of accommodation from being used for Government Departments?

Mr. Buchan-Hepburn: Broadly speaking.

Excavations (Reports)

Mr. E. Fletcher: asked the Minister of Works if he will adopt the recommendation made in the Report of the Ancient Monuments Board for 1955 that,

in order to accelerate the publication of reports of excavations sponsored by him, a fee should be paid, not only for the actual work of excavation, but also for the preparation of the report of such excavation.

Mr. Buchan-Hepburn: In fact, the present fees paid to supervisors are intended to provide in one instalment for the writing of the report, as well as for the actual supervision of excavations. But I share the anxiety of the Ancient Monuments Board for England to ensure the early preparation of reports on excavations sponsored by my Department, and I am considering what further improvements can be made.

Mr. Fletcher: Is the Minister repudiating the Report of his Board, which said quite categorically that the archaeological excavation is incomplete until the report is published, that the Minister's present practice does not enable reports to be published and that research workers and others interested are thereby hampered? Will he not reconsider the matter in the light of the Report of this Board?

Mr. Buchan-Hepburn: I said in my answer that I shared the anxiety of the Ancient Monuments Board for England, and that I am looking into the whole question again.

Mr. Anthony Greenwood: It is not enough to share the anxiety of the Ancient Monuments Board. What we want from the Minister is an assurance that he is prepared to revise the present method of paying excavators on the lines suggested by the Board.

Mr. Buchan-Hepburn: To share the anxieties of the Board is something, but I also said that I am looking into the whole matter again.

Oral Answers to Questions — SCIENTIFIC AND INDUSTRIAL RESEARCH

Textiles (Flammability)

Mrs. McLaughlin: asked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, if he is now in a position to make a statement on the Department of Scientific and Industrial Research research into the most suitable method of testing textiles for flammability.

The Parliamentary Secretary to the Ministry of Works (Mr. J. R. Bevins): Two methods of testing textiles for flammability are at present being studied by a committee of the Textile Institute, co-operating with the British Standards Institute and the Joint Fire Research Organisation.
The latter is also carrying out a survey in connection with this investigation, which involves collecting statistics and examining samples of clothing involved in burning accidents, and it will not be possible to lay down standards until this survey has been completed.

Mrs. McLaughlin: Is the Minister aware of the great concern of the general public to have this research brought to a satisfactory conclusion as soon as possible? Will he do his utmost to inform those involved in the research of the great need for getting on as quickly as possible?

Mr. Bevins: Certainly.

Oral Answers to Questions — BRITISH ARMY

National Service Men, Kempston Camp

Mr. Allaun: asked the Secretary of State for War (1) at what time of day, on seven out of their 15 days' reserve training, three National Service men started the work of making cardboard barrows for an officers' mess cocktail party at Kempston;
(2) what representations he has now received from ex-National Service men Hodgson and Quy and from hon. Members regarding the making of cardboard barrows for an officers' mess cocktail party at Kempston Camp; and if he will make a statement.

The Secretary of State for War (Mr. Antony Head): Two of the men referred to were clerks who were employed in the office of Headquarters, Army Emergency Reserve during their part-time training. They attended normal parades in the morning and afternoon and carried out the documentation of reservists who were carrying out their annual training at the camp. This work is spasmodic and did not occupy all their time.
In the intervals, during the five working days from Thursday of the first week of camp to Wednesday of the second these

men made these barrows. I cannot give a detailed timetable as they were not under continuous supervision. The third soldier, a painter, who reported for training a week later than the others did part-time work on them from Monday to Wednesday only.
I have received no direct representation from the soldier who wrote the articles in the Manchester newspaper which brought the attention of several hon. Members to the case. I have received a letter of complaint from the other soldier.

Mr. Allaun: Is the Minister aware that these men state that they started making the barrows at 8 a.m. daily? As in the House, at Question Time last month, the Minister stated that the work was done in their leisure time, thereby creating the impression that it was done outside Service hours, does he not think that he should tell the House that he unintentionally misled it? Is he aware that the men agreed to do this work only because, apart from making cardboard chess sets and using them, they had no other work to do?

Mr. Head: No, Sir, what happened was as I stated. These men did this work in their spare time. I will admit—and I said this before—that these men were not as fully employed as they should have been. Part of the reason was that in two cases their camps had been transferred, at their own request, from the proper date, which meant their going to a different unit, to which they did not belong. It is also of interest that none of these men complained at the time that he had not enough to do. Had they complained, they might have been given extra duties.

Mr. Strachey: Would not the Secretary of State agree that this is only another instance of the progressive difficulty of finding useful purposes for the part-time Reserve when called up, and is it not another case of the growing inappropriateness of the whole National Service system at the moment?

Mr. Head: We have 26,000 A.E.R. men being trained, and this is the first complaint which has been aired in the House of Commons on this A.E.R. training. A very large number of men now do this training only once, after which


they have finished. Furthermore, there has had to be reorganisation because of the one-year instead of the three-year system.

Mr. Shinwell: Ought not the right hon. Gentleman to regard this matter rather more seriously than he does? What is the purpose of this 15-days' Reserve training if men are to be occupied in such tasks? Would he give the House an assurance that he will make an inquiry into the matter in order to ensure that men's time is being properly used——

Mr. Ellis Smith: That would be a change.

Mr. Shinwell: —for the purpose for which the Reserve is intended?

Mr. Head: I take this matter extremely seriously. I have made a great many inquiries into it and have gone as far as to say to the commanders-in-chief that if they consider that part-time training is a waste of time for men, because of various reasons of organisation on a short-term basis, it should be cancelled. I would point out, however, that in all this part-time training—and this is especially true of the A.E.R.—there must be National Service men doing part-time training who have to look after the administration of the camps. Somebody has to do these hewer-of-wood and drawer-of-water tasks.

Officers, Jordan

Mr. Philips Price: asked the Secretary of State for War how many British officers there are in Jordan at the present time; and whether they are directly under the orders of the Jordan Government.

Mr. Head: In addition to officers with British units, 12 British Army officers are at present serving with the Arab Legion. These 12 are under the orders of senior Jordanian officers but remain subject to the Army Act.

Mr. Price: In view of the uncertain political conditions in Jordan, of which we have unfortunately had evidence in recent weeks, is it any longer desirable that these officers should continue in the service of the Jordan Government?

Mr. Head: Yes, Sir. These men are in an advisory and training capacity and, although it is not entirely my sphere of responsibility, I am sure that from the military point of view their presence is justified.

Goodge Street Underground Station

Mr. Hector Hughes: asked the Secretary of State for War if he will make a statement about the Goodge Street Underground Station which was used as an assembly station for Her Majesty's troops until it was recently damaged by fire, indicating whether it has been repaired, the extent, nature and cost of the repairs and the purpose for which it is now being used.

Mr. Head: It has not been repaired and is not being used.

Mr. Hughes: In view of the grave dangers to which young soldiers were exposed recently in that place, will the Minister give an undertaking that it will never again be used to house troops?

Mr. Head: I gave that undertaking to the hon. and learned Member about a month ago.

Overseas Personnel (Special Telegrams)

Mr. K. Thompson: asked the Secretary of State for War what administrative arrangements exist for notifying men serving overseas of sudden changes in their domestic circumstances.

Mr. Head: Relatives may send special telegrams at United Kingdom inland rates to a soldier wherever he is serving.

Mr. Thompson: May I ask my right hon. Friend if the relatives know that fact, and how they get to know it? Secondly, may I ask him what happens if a message goes direct to the War Office containing information of this kind? What does the War Office do about it?

Mr. Head: The answer to the first part of the supplementary question is that this information has been posted on all notice boards throughout the Army, but obviously we cannot write to all relatives. It is the only way in which we can inform people of a practice which has existed for a long time. I think that the second part of the supplementary question arises on the next Question.

Personal Case

Mr. K. Thompson: asked the Secretary of State for War if he will investigate the circumstances in which his Department failed to notify a National Service man of the sudden death of his father.

Mr. Head: This information was immediately passed to the soldier's unit in Korea. Unfortunately the unit was in the process of being disbanded and the information did not reach Sapper Birch. I should like to take this opportunity of apologising for his not receiving it.

Mr. Thompson: The relatives of Sapper Birch will be very grateful to my right hon. Friend for his expression of regret. Is my right hon. Friend aware, however, how much distress a matter like this can cause within the circle of the family, and how much damage is done to the reputation of the administrative side of the Army by repeated happenings of this kind?

Mr. Head: Well, it is a very large Army. But I can assure my hon. Friend that this particular information was passed on for the sapper by us. It is normal for relatives themselves to inform men of this kind of thing, but if we are particularly asked we do so, and did so by the best means possible. I very much regret that the information did not reach him because of the disbandment.

Mr. Awbery: In view of the fact that the Minister is often criticised for his sins of omission and commission, may I ask him to accept my appreciation of the speed with which last week he brought home a young man to see his father, who had been taken seriously ill?

Senior Officers

Mr. H. Hynd: asked the Secretary of State for War how many officers of the rank of brigadier and upwards there now are in the Army; and by how many the number will be reduced as a consequence of redeployment of our troops.

Mr. Head: Five hundred and thirty-six. I cannot yet say what reduction will be achieved.

Mr. Hynd: Does that figure include only officers on the Active List, or does it include also those who are retired or on the Reserve List? Is there not a tendency at present for the number of higher ranks to increase while the number in the Army generally is decreasing?

Mr. Head: These are only those on the Active List. So far as senior officers

are concerned, our object is to have the minimum necessary for the size of Army we maintain.

Forces, Germany

Mr. Stokes: asked the Secretary of State for War the total number of troops in the four divisions in Germany; and to what this number will be reduced when those divisions have been revised in the light of modern fire power.

Mr. Head: We do not give these particulars.

Mr. Stokes: Can the Minister tell us whether anything has been done? If there has, there do not seem to be any visible signs of it. The numbers in the Army seem to stay up. Is the right hon. Gentleman taking any notice of the change in fire power?

Mr. Head: The Army, as the right hon. Gentleman will no doubt recollect, is running down at the rate of 30,000 a year over a two-year period.

Mr. Shinwell: But will the Secretary of State take note that, although we are committed by the Paris Agreements to provide four divisions, we are also committed, as an alternative, to provide the equivalent in fighting power? In view of that, is it the intention of the Government to make the necessary adaptation?

Mr. Head: It is not for me, I think, to discuss future policy in this matter. That rests on many considerations outside my Department. I can tell the right hon. Gentleman, however, that all the latest methods and considerations of modern warfare are being considered in this respect.

Mr. Stokes: Then, as a result of this consideration, may we expect a considerable running down of the number of men in the division?

Mr. Head: So far as that is concerned, I think that the right hon. Gentleman had better wait and see.

Fires, Cyprus (Casualties)

Mr. Emrys Hughes: asked the Secretary of State for War if he can now state the result of the investigations into the circumstances which led to the loss of 28 lives by burning in the fires in Cyprus.

Mr. Head: Not yet, Sir.

Oral Answers to Questions — TRADE AND COMMERCE

Industrial Development, Aberdeen

Mr. Elector Hughes: asked the President of the Board of Trade if he will state his plans for encouraging the development of light industry in Aberdeen.

The Parliamentary Secretary to the Board of Trade (Mr. Derek Walker-Smith): The Board of Trade will continue to bring the existence of sites, labour supply and other facilities at Aberdeen to the notice of suitable industry seeking new quarters; but its needs must be considered in relation to those of other places.

Mr. Hughes: Does the Minister realise that in a place so far north as Aberdeen the ratio of freight charges to the value of the freight makes the provision of light industries particularly important, and would he take steps to see that such light industries are fostered there?

Mr. Walker-Smith: I will certainly bear that and all other relevant considerations in mind.

Oral Answers to Questions — PROCEDURE OF THE HOUSE (SELECT COMMITTEE)

Mr. Emrys Hughes: asked the Prime Minister if he will consider including in the terms of reference of the proposed Select Committee on Procedure power to consider whether Questions dealing with purely Scottish matters should be answered at the Scottish Grand Committee.

The Prime Minister (Sir Anthony Eden): As I indicated in replying to the hon. Gentleman the Member for Dundee, East (Mr. G. M. Thomson) on 26th June, I believe that the arrangements for Parliamentary Questions are best discussed through the usual channels and in consultation with the authorities of the House. In any event, I do not think that a proposal to have Questions answered in Standing Committee is practicable or desirable.

Mr. Hughes: Is the Prime Minister aware that we get the opportunity of meeting the Secretary of State for Scotland at Question Time only about once in every six weeks, and that if Scottish Questions were asked in the Scottish Grand Committee it would ease the problems of other hon. Members in the House?

The Prime Minister: I thought that we had 23 Scottish Questions on the Order Paper today.

Mr. Woodburn: I hope that the Prime Minister will not take the humour of my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) too seriously in this case, because I can assure him that most Scottish Members, and Scotland itself, would very much resent any suggestion of putting Scotland off the Floor of this House.

The Prime Minister: That had occurred to me.

Oral Answers to Questions — COMMONWEALTH DEVELOPMENT (CAPITAL)

Mr. H. Wilson: asked the Prime Minister what representations he has received from Prime Ministers and other Government representatives of Commonwealth countries about the difficulty of raising capital in London for Commonwealth development and about the rates of interest charged for such capital as is available.

The Prime Minister: I would not wish to add to the agreed statement made at the end of our Conference. In this it was said that the Prime Ministers noted with satisfaction the United Kingdom's determination to maintain and improve its capacity to serve as a source of capital for development in Commonwealth countries.

Mr. Wilson: We all welcome the emphasis placed on this subject at the recent Prime Ministers Conference, but is the right hon. Gentleman not aware that last year, out of current income, this country found a net figure of only £4 million for investment overseas? Is he further aware that a considerable number of Commonwealth countries are now having to borrow from such countries as Norway, Switzerland and the United States, partly because the capital is not available here, and partly because of the extortionate rates of interest at present charged by this country?

The Prime Minister: I should not like to debate the first part of the right hon. Gentleman's supplementary question now. As regards the general position, it is perfectly true that we wish there


were more capital available for this investment, and, in point of fact, as I think my right hon. Friend the Chancellor of the Exchequer made plain a short time ago, we hope there will prove to have been, in the first six months of the year, a surplus of £100 million for overseas investment, and although that is not as much as we should like, it is a very considerable improvement on last year.

Mr. Wilson: But quite apart from the question of surplus, which raises very wide issues of economic policy, is not the Prime Minister aware that this very essential borrowing is also inhibited by the penal Bank Rate in operation, and will he discuss that with the Chancellor of the Exchequer because of its effect on Commonwealth borrowing?

The Prime Minister: That is why I carefully read out the Commonwealth statement. What it referred to was this country as a source of capital. There is nothing in it about the rates of interest.

Mr. Beresford Craddock: Is it not a fact that this country is also subscribing very large sums to the Commonwealth through the colonial development and welfare fund?

The Prime Minister: Yes, Sir, that is true, but it also remains the fact, as I say, that although the first six months of this year have been better, there is not as much capital as we should all like to see, party politics aside, for investment in the Commonwealth overseas. But as a general proposition, that is true.

Mr. Gaitskell: Without wishing to enter into the detail of a very complicated matter, may I ask the Prime Minister if he would like to make it plain that it would not satisfy the terms of the communiqué if we were to continue borrowing on short-term from the Colonies and lending on long-term to the rest of the Commonwealth?

The Prime Minister: No; I think it is fair to say that the figure which my right hon. Friend gave of £100 million was overall investment.

Oral Answers to Questions — CEYLON (BASES)

Mr. Warbey: asked the Prime Minister if he will make a statement on his discussions with the Prime Minister

of Ceylon regarding the future of United Kingdom bases on the island.

The Prime Minister: A statement, which was agreed between the Prime Minister of Ceylon and myself, was published at the end of the meeting of Commonwealth Prime Ministers. I have nothing to add to that statement.

Mr. Warbey: Can the Prime Minister say whether, as a result of this agreement, the Government of Ceylon will be entirely free to determine the use of the bases in Ceylon both in war and in peace?

The Prime Minister: The powers in this matter which the Government of Ceylon have, if powers is the right term, date from the agreement of 1947. They are written down there. The terms of this exchange between the Prime Minister of Ceylon and myself will be made available in the Library.

Mr. Stokes: May I ask the Prime Minister whether the arrangements that he has arrived at will form the pattern of future arrangements with other parts of the Commonwealth?

The Prime Minister: No, Sir. This pattern stems—if a pattern can stem—from arrangements made in 1947—arrangements then entered into with Ceylon in a defence agreement. As regards self-governing parts of the Commonwealth, arrangements are, of course, made between them and us, or between each other, freely in accordance with whatever terms they like to set down.

Major Legge-Bourke: Would not my right hon. Friend agree that it is inherent in the conception of Dominion status that individual Dominions should have similar rights to these, and that there is nothing inconsistent with Dominion status in the new agreement?

The Prime Minister: Most emphatically, there is not. There are various agreements in various parts of the Commonwealth on matters of this kind.

Mr. Gaitskell: While welcoming this agreement, so far as it goes, may I ask the Prime Minister to say whether, in his opinion, we shall, as a result of it, be in any worse defensive position than we were before?

The Prime Minister: We have to work these things out. We have not yet really


reached a point where we work out in detail what the facilities will be. All we have agreed is that we will work them out. I would rather not make a final statement until I see what the terms of the final agreement are.

Oral Answers to Questions — NATIONALISED INDUSTRIES (QUESTIONS TO MINISTERS)

Mr. Hobson: asked the Prime Minister if he will now give instructions to Ministers responsible for nationalised industries to answer Questions about matters arising in the annual reports and accounts of the appropriate industries.

The Prime Minister: As the hon. Gentleman will be aware, this question has been frequently considered. I do not, however, think that any change in the rules in regard to Questions about the nationalised industries is called for.

Mr. Hobson: Would the Prime Minister look at this Question again, because it really is becoming most important, particularly with regard to the accounts of Cable and Wireless where, on page 19, there is shown the revenue from subsidiary companies, and it is impossible to find out which are the subsidiary companies, even by reference to the Schedule to the Act? Will the right hon. Gentleman look at this matter again?

The Prime Minister: I have sympathy with any Question which the hon. Member for Keighley (Mr. Hobson) puts, because it is always a carefully considered one. If we are able to have a debate, which, if time allows, we should like to have, it would be useful if that point could be discussed.

Oral Answers to Questions — DISARMAMENT (MR. BULGANIN'S LETTER)

Mr. V. Yates: asked the Prime Minister if he will undertake to reply to the letter addressed to him by Mr. Bulganin on 6th June regarding the new approach to disarmament by the Soviet Government, before the end of July; and if he will, also, make a statement.

The Prime Minister: I replied to Mr. Bulganin's letter yesterday, and my reply has been published today. I do not wish to add to that reply.

Mr. Yates: Does not the Prime Minister think that, after six weeks' consideration, it is disappointing that the Government can offer no more than they offered in the White Paper? Would the Government consider that to leave ourselves with 700,000 men by 1958 is a fitting gesture to a move of this kind, and would not the making of a bigger gesture lead to a further step towards a reduction of armed forces?

The Prime Minister: I do not think that this is a question of gestures; it is a question of serious exchanges of views. As I said, my reply was the result of considerable exchanges of view among all our Allies. In the circumstances, I think it was a reasoned and reasonable document.

Oral Answers to Questions — PUBLIC SERVANTS (MARRIAGE QUESTIONNAIRE)

Mr. Younger: asked the Prime Minister whether the questionnaire regarding marriage or remarriage which is sent to atomic workers by the Atomic Energy Authority with the approval of Ministers is sent also to all other persons engaged upon Government work of the highest secrecy; and what exceptions there are to this procedure.

The Prime Minister: No, Sir; but the Government are considering, in the light of the findings of the Privy Councillors' Conference, how far it may be necessary to require certain categories of staff in the public service to notify this information.

Mr. Younger: Does the Prime Minister not think that if there is to be an inquisition of this kind, which, I understand, is something of an innovation, it should be only on the basis of the particular secrecy of the work involved? Further, is it not really a sign that this step has been very ill-thought-out, that it shoud be introduced piecemeal in this way in one section only of employees handling secret work?

The Prime Minister: I agree with the right hon. Gentleman to this extent, that I think it is a matter which must be considered not for one part of the Civil Service or public service but over the whole, and I can give him the assurance that that is what is intended as a result of the Privy Councillors' Report.

Oral Answers to Questions — HIGH COMMISSION PROTECTORATES

Mr. Fenner Brockway: asked the Prime Minister what conclusions were reached from the discussions on the future of the High Commission Protectorates at the Commonwealth Ministers' Conference.

The Prime Minister: The future of the Protectorates was not discussed at the Conference of Commonwealth Prime Ministers. During his visit to London, however, the Prime Minister of the Union of South Africa reiterated the Union Government's desire for their transfer to the Union. Her Majesty's Government in the United Kingdom restated their position, and agreement was not reached.

Mr. Brockway: May I ask the right hon. Gentleman whether the view of Her Majesty's Government was that the peoples of the Protectorates should be consulted before there was any transference, and whether the word "consultation" implies the consent of those people, because we have had recently the unfortunate experience of Central African Federation, where a decision was made with consultation, but without consent?

The Prime Minister: As I said, agreement was not reached; our position remains as it was stated by my right hon. Friend the Member for Woodford (Sir W. Churchill) on 13th April, 1954.

Oral Answers to Questions — GOLD COAST AND FEDERATION OF RHODESIA AND NYASALAND

Mr. Fenner Brockway: asked the Prime Minister what conclusions were reached at the Commonwealth Ministers' Conference regarding the declared intention of the Gold Coast Government to apply for admission to the Commonwealth, and the relationship of the Federation of Rhodesia and Nyasaland to the Commonwealth.

The Prime Minister: The question of membership for the Gold Coast will arise only when the country attains full self-government. It will then be one for all member countries of the Commonwealth.
As regards the Federation, the hon. Member will have seen from the statement issued after our meeting that the Commonwealth Prime Ministers will

welcome the continued participation of the Federal Prime Minister in our meetings.

Mr. Brockway: May I ask the right hon. Gentleman two Questions? In view of the reports of the Conference which have appeared, will he say whether it is the case now that a Colony which becomes an independent country shall have the right to join the Commonwealth Conference without a specific decision upon such an application? Secondly, why is it that the Federation of Rhodesia and Nyasaland is to have the right to be represented in the Commonwealth Conference when it is not a democratic Federation, and why should it have that right any more than the West Indies or Nigeria?

The Prime Minister: I can only tell the hon. Gentleman, as regards the last part of his Question, that the Prime Ministers of the Commonwealth, as they say, taking into account the 20 years since the Prime Minister of Southern Rhodesia, and, as he is now, Prime Minister of the Federation, has been with us, agreed that they would welcome the continued participation of the Prime Minister of the Federation. That seemed to me to be a reasonable and sensible arrangement, and I am glad the Prime Ministers took that view.

Mr. J. Griffiths: Will the Prime Minister make it clear that in deciding to continue that participation, it does not mean any decision by the Commonwealth Prime Ministers' Conference that there is any change in the status of the Federation?

The Prime Minister: I think it means just exactly and precisely what it says, neither more nor less.

Mr. Dugdale: Is the Prime Minister aware that Lord Malvern was invited to the Conference only in view of his special qualifications—personal qualifications? While realising that probably no actual vote was taken at the Conference, may I ask him to say whether in fact the decision to admit the Federation of Rhodesia and Nyasaland was taken unanimously without disagreement by any of the Prime Ministers?

The Prime Minister: There was no question of their taking decisions in that


sense in the Commonwealth Prime Ministers' meeting, but the statement issued from the Conference expressed the views of each and all the Prime Ministers there present.

Mr. Brockway: On a point of order. May I ask the Prime Minister to a reply to the first of the two questions which I put, which he ignored?

Mr. Speaker: That is not a point of order.

The Prime Minister: I apologise; I forgot the question. I do not know what it was.

Oral Answers to Questions — GOVERNMENT CONTRACTS (SECURITY)

Mrs. Castle: asked the Prime Minister what changes he is now prepared to make in the appeal procedure for non-civil servants who are considered a security risk.

The Prime Minister: The Conference of Privy Councillors recommended that certain rights of appeal should be given, and this recommendation has, as they suggested, been discussed with the National Joint Advisory Council. As a result, the employees of Government contractors engaged on secret Government contracts who as a result of a directive by a Minister are dismissed, or in his opinion are liable to suffer financial loss, will be given the same right as is enjoyed by persons in the public service of having their case considered by the Three Advisers.

Mrs. Castle: Is the Prime Minister aware that the present appeal machinery for civil servants is unsatisfactory, and that civil servants have not the right to be represented, either legally or by a union, before the tribunal, nor are they given chapter and verse for the charges brought against them, as promised by Mr. Attlee, as he then was, in 1948? Will the Prime Minister have a look at the appeal machinery for both categories, with a view to meeting these three points?

The Prime Minister: I must say that I have not heard that particular complaint, though I have heard others. I will look into it.

Oral Answers to Questions — HOUSING AND LOCAL GOVERNMENT

Planning Appeal Inquiries

Mr. Peyton: asked the Minister of Housing and Local Government how many planning appeal inquiries under the Town and Country Planning Act took place in 1954 and 1955; and the average length of time which elapsed between the hearing of the inquiry and the promulgation of his decision.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. J. Enoch Powell): For England and Wales, 2,864 in 1954 and 3,342 in 1955. The estimated average time taken was between eight and nine weeks.

Mr. Peyton: While recognising the difficulties in which my hon. Friend's Department is involved in administering this very cumbrous and impossible Act of Parliament, may I ask that he and his right hon. Friend should review its operation with a view to eliminating, so far as possible, both the delays and the other petty vexations which occur?

Mr. Powell: There is a continuous effort to reduce the time taken to deal with appeals but the issues concerned are often important issues, on which a hasty result should not be reached.

Motor Vehicle Factory, Luton-Dunstable

Mr. Albu: asked the Minister of Housing and Local Government from what districts he expects the workers to be drawn for the new factory for the manufacture of motor vehicles which he has agreed should be built in the Luton-Dunstable area.

Mr. Powell: The recruitment of labour will be primarily a matter for the firm; but I hope that arrangements will be made, with its co-operation, to ensure that so far as possible the labour will be recruited from London, and from people with a housing need.

Mr. Albu: Is the Minister aware that there is already a considerable shortage of labour in the new towns due partly to the fact that the motor industries in the Luton-Dunstable area are drawing labour away from them? Does he consider this to be a sensible planning arrangement?

Mr. Powell: On the whole, the extension of industry in the new towns is slightly in advance of the expansion of housing, but the desirability of providing housing in the area for the labour that will be required in the Dunstable and Luton area is fully recognised.

BRITISH MOTOR CORPORATION (NOTICE OF STRIKE)

Mr. G. Brown: (by Private Notice) asked the Minister of Labour whether his attention has been called to the decision of the trade unions concerned to call a strike at the British Motor Corporation's factories from 23rd July, as a result of the company's refusal to negotiate, and whether he has any statement to make.

The Minister of Labour and National Service (Mr. Iain Macleod): I am, of course, aware of the resolution passed yesterday by representatives of the unions concerned recommending to their executive councils that notice be given to the British Motor Corporation that in certain eventualities all labour will be withdrawn on and from 23rd July. I have not been approached by either of the parties and, as I understand it, there is machinery available within the industry for dealing with the matter which has not yet been fully used.
I do not think that it would be appropriate for me to make any statement at this stage.

Mr. Brown: Does the Minister realise that, in the light of the more serious news today of the decision by the main unions concerned, that sounds a rather complacent statement? I am sure he would agree that not to use the fortnight which is at our disposal to bring about a settlement of what could be a very threatening dispute would be a major tragedy.
Does the Minister realise that the question of compensation to these men who were so hurriedly put out of work is emerging as a real major issue? Will the right hon. Gentleman put himself at the disposal of the parties concerned with a view to convening a joint meeting, with himself in the chair if need be, at which a solution to this problem might be the major issue?

Mr. Macleod: My statement is an exact account of the facts as they were yesterday, and, indeed, as they still are today. Of course, we must use the time that is available to us to seek any means of a solution—and I exclude no solution—to this rather difficult issue.
I should make it clear that machinery is available in the industry. It has been the policy of Ministers of Labour, of all parties, that they do not in any way attempt to weaken such machinery and that intervention is called for only after that machinery has been fully used and exhausted. Subject to that, however, the services of myself and of the Ministry will, of course, be available to anybody who seeks to make use of them.

Mr. Shurmer: Is the Minister aware that not only is there discontent among the men who have already been dismissed, but that there is great discontent among those who remain at work because there is no certainty about the position of the industry and how long it will be before they are dismissed, at practically a moment's notice, like the others? Cannot the Minister ask his right hon. Friend to set up an inquiry into the motor industry at once to find what the future holds, instead of leaving the men discontented and uncertain from day to day, as many of them are in the Austin and other motor factories in the area?

Mr. Macleod: The Question relates to the recommendation taken by the different unions yesterday. On the wider question of a Government inquiry into the motor car industry, that is, as the hon. Member indicated, a matter for my right hon. Friend, who has replied on it in the House and to whose statement I have nothing to add.

Mr. Gower: Does my right hon. Friend consider that there is sufficient recognition in the country generally that the British motor industry is fighting for its life against the motor industries of other countries?

Mr. Ellis Smith: Will the Minister bear in mind that, owing to the cruel action taken by the British Motor Corporation, the unions will be fully justified in any action they take? Will he bear in mind that that action was equivalent to a repudiation of the National Agreement, Clause 12 of which states that when a


depression in trade arises systematic short time shall be worked where practicable in preference to discharging men? In view of the fact that we have had full employment for 15 years, when all these men have given of their best, surely different treatment is called for than that meted out by the British Motor Corporation.

Mr. Macleod: I recognise the sincerity with which those views are very widely held. As to the wisdom of this action, that is a matter on which, as the hon. Member knows, Ministers of Labour do not comment.

PRIME MINISTER AND FOREIGN SECRETARY (VISIT TO U.S.S.R.)

The Prime Minister: With your permission, Mr. Speaker, and that of the House I wish to make a short statement.
During the recent visit of the Soviet leaders to this country, my right hon. and learned Friend the Foreign Secretary and I accepted an invitation to pay a return visit to the Soviet Union in due course. It has now been agreed that this should take place in May next year, and, as at present proposed, we would leave this country on 5th May. Our visit to the Soviet Union will last about ten days.
The Foreign Secretary and I look forward during the course of this visit to renewing our conversations with the Soviet leaders. There will also, I understand, be opportunities to visit Leningrad and perhaps other areas of the Soviet Union.

Mr. Gaitskell: Although it is rather too soon to ask the Prime Minister detailed questions about his visit, may I say, on behalf of my right hon. and hon. Friends, that we welcome the fact that it is to take place and hope that it will be fruitful?

NEW MEMBER SWORN

The Right Honourable Sir Frank Soskice, Q.C., for Newport.

BILL PRESENTED

OVERSEAS RESOURCES DEVELOPMENT

Bill to make new provision as to the functions of the Colonial Development Corporation, including provision in respect of past activities of the said Corporation; and for purposes connected with the matters aforesaid, presented by Mr. Lennox-Boyd; supported by the Attorney-General, Mr. Hare, Mr. H. Brooke, and Commander Noble; read the First time; to be read a Second time upon Thursday and to be printed. [Bill 162.]

BUSINESS OF THE HOUSE

Ordered,

That the Finance (No. 2) Bill, as amended, may be considered immediately after the recommital of the Bill and Report thereof, notwithstanding the practice of the House as to the interval between the various stages of such a Bill.—[Mr. H. Macmillan.]

Orders of the Day — FINANCE (SAVINGS BANKS)

Resolution reported,

That, for the purposes of any Act of the present Session relating to Finance, it is expedient to authorise such payments out of the Consolidated Fund or into the Exchequer as may result from the application to other savings banks of any provisions of the Trustee Savings Banks Act, 1954, relating to trustee savings banks.

Resolution agreed to.

Instruction to any Committee to whom the Finance (No. 2) Bill may be recommitted that they have power to make provision therein pursuant to the said Resolution.

Orders of the Day — FINANCE (No. 2) BILL

Order for consideration, as amended, read.

Bill re-committed to a Committee of the whole House, in respect of the Amendments to Clause 9, page 8, lines 11, 29 and 37; Clause 10, page 9, lines 3, 6 and 18; Clause 11, page 10, lines 5, 8 and 10; Clause 20, page 20, line 40, page 21 lines 22 and 37, page 22, lines 11, 15 23, 25 and 35, page 23, line 39; Clause 21, page 24, line 28; Clause 22, page 29, lines 3 and 7; Schedule 2, page 54, line 49; and the new Schedule (Retirement Annuities: Adjustments of Limit on Qualifying Premiums), standing on the Notice Paper in the name of the Chancellor of the Exchequer.—[Mr. H. Macmillan.]

Bill immediately considered in Committee.

[Sir CHARLES MACANDREW in the Chair]

Clause 9.—(RELIEF FROM INCOME TAX ON CERTAIN SAVINGS BANK INTEREST.)

3.40 p.m.

The Economic Secretary to the Treasury (Sir Edward Boyle): I beg to move, in page 8, line 11, after "bank", to insert:
or a seamen's savings bank".
I think it would be convenient, Sir Charles, to discuss with this Amendment my subsequent one, in page 8, line 37.
The Seamen's Savings Bank was set up under the Merchant Shipping Act, 1894, and is operated by the Ministry of Transport and Civil Aviation. The Ministry receives interest on deposits lodged with the National Debt Commissioners at the rate of £2 17s. 6d. per cent. and uses the

margin of 7s. 6d. to cover its expenses and credits depositors with £2 10s. per cent. In this respect the Seamen's Savings Bank is on the same basis as a trustee savings bank, though not a trustee savings bank within the meaning of the 1954 Act.
My right hon. Friend has discovered, since the Bill was last in Committee, that the Seamen's Savings Bank is unique in that it is the only savings institution in the country to which all the terms of this Clause apply except for the fact that it is not a trustee savings bank. It was left out on this account at the time the Clause was drafted. My right hon. Friend wants to take the opportunity of the recommittal of the Bill to extend to it the concession made to the trustee savings banks which it resembles in the two important features, that the statutory interest is 2½ per cent. and there is automatic lending to the State.

Mr. A. G. Bottomley: We on this side of the Committee see no reason to object to this proposal, but we should like to see it extended further. I do not know whether, at this stage, it would be appropriate to ask the Economic Secretary about, for instance, the case of the Birmingham Municipal Bank. When we discussed savings banks generally my hon. Friend the Member for Stechford (Mr. Roy Jenkins) raised the question of the Birmingham Municipal Bank, and the Economic Secretary favourably indicated that the bank could be treated in the same way as other trustee savings banks.
The Economic Secretary will remember that I myself called attention to the Walthamstow Savings Bank, and many of my hon. Friends who represent Scottish constituencies will be aware that there are also Scottish savings banks. We were hoping that the savings banks run by municipalities, as long as they pay 2½ per cent. and comply with the other requirements applicable to trustee savings banks, would be given the same facilities. Clearly, they ought to have them.
Therefore, while supporting the Economic Secretary in his view about the Seamen's Savings Bank, I would ask him why he has gone back on his word—[Interruption.] I think that would be the interpretation to be placed upon what has happened. [Interruption.] The matter is


to come up on the next Amendment? I see. We shall deal with it then. Perhaps the Economic Secretary will understand that he will he questioned further on this matter.
Amendment agreed to.

Sir E. Boyle: I beg to move, in page 8, line 29, at the end to insert:
(3) Where, on the application in that behalf of any savings bank maintained under a local Act, the Treasury are satisfied, having regard to the rules to be adopted by the bank, the conditions subject to which deposits are to be accepted by it or any department to be formed by it, and such other matters as the Treasury may require to be proposed in the application, that the deposits will, if the application is granted, sufficiently correspond with ordinary deposits in a trustee savings bank to justify a certificate under this section, the Treasury may certify the bank or department for the purposes of this section, and, while the certificate is in force,—

(a) the interest payable on the deposits shall not exceed the rate of two and a half per cent. per annum, but the interest shall be treated for the purposes of this section as if it were such interest as is mentioned in subsection (1) of this section; and
(b) the deposits shall be invested with the National Debt Commissioners, and sections twenty-five to thirty-eight of the Trustee Savings Ranks Act, 1954, shall apply in relation to the bank or department as they apply in relation to trustee savings banks, but subject to such modifications as the Treasury may by order provide, including, if the order so provides, a reduction of the rate which the Treasury may by order under subsection (2) of section twenty-seven of that Act fix as the rate of interest on receipts for the bank's or department's payments into the Fund for the Banks for Savings.

An order under this subsection shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament, and may be varied or revoked by a subsequent order.
(4) If the Treasury at any time cease to be satisfied that a certificate under the last foregoing subsection is justified they may revoke the certificate and give such directions as they think fit for the withdrawal by the bank or department of any money standing to its credit in the books of the National Debt Commissioners.
As the Committee will remember, we had a considerable discussion, when the Bill was last in Committee, about the position of the Birmingham Municipal Bank. I should like, at the outset, because I do not want to relate too much recent history to the Committee and so delay the proceedings unnecessarily, to express my own absolutely unreserved apologies to hon. Members of the Com-

mittee if any words of mine then caused any misunderstanding. It was not intentional on my part. I should like to make that apology beyond any question at the very start of my remarks.
3.45 p.m.
My right hon. Friend has been in touch with Birmingham Members on both sides of the Committee. My right hon. Friend came to the conclusion that it would be unreasonable to insist on the formation of a trustee savings bank with the two essential criteria, if the concession could be fulfilled by a new department of the Birmingham Municipal Bank under a less rigid formula.
The effect of the Amendment is as follows. In the first place, the extent of this concession is confined to any savings bank maintained under a local Act. The Birmingham Municipal Bank is at present the only such bank in being, having been formed under the Birmingham Corporation Act, 1919. It is true that other local authorities have similar powers, but although they have similar powers, those powers have not so far been used. Secondly, the Treasury must certify the applicant. The criterion for the certificate, if the concession is applied, is that the deposits sufficiently correspond to the ordinary deposits in a trustee savings bank to justify such treatment.
Any new department of the municipal bank formed for the purpose would function like the ordinary department of a trustee savings bank, but would operate under its own rules and under the terms of the corporation's local powers. Under the Birmingham Act the regulations governing the conduct of the bank require the approval of the Treasury, and the same arrangement would apply to any new department formed for this purpose. While the certificate is in force the interest payable to the depositors of the new department shall not exceed 2½ per cent. and the money lent with the department by the depositors must be invested with the National Debt Commissioners. In return, depositors draw the Income Tax concession.
The Amendment does not provide, and, indeed, is not intended to provide for the National Debt Commissioners to accept the book value of the securities held at present by the bank and by the corpora-


tion. It enables the National Debt Commissioners to take new deposits into the Fund for the Banks for Saving and to pay interest on them. This is done by applying Sections 25 to 38 of the Trustee Savings Banks Act, 1954. The Treasury can modify the detailed application of those provisions by Order, and, in particular—and this is the point—the Treasury can fix the rate of interest payable by the Commissioners lower than the rate paid to the trustee savings banks. The rate is at present £2 17s. 6d. per cent. That is the rate applicable to both high cost and low cost banks—if I may so put it—but the latter have the liability to contribute to the Mutual Assistance Scheme, from which the former are helped.
The only criticism which may arise of the Amendment is that the Amendment does not provide for the acceptance by the National Debt Commissioners of securities at book value in lieu of cash. The Birmingham Municipal Bank, or the corporation on its behalf, has a portfolio of securities many of which are standing at lower than book value. I quite understand that what the Birmingham Municipal Bank has in mind is that if depositors in the bank transfer to the new department the bank or the corporation may have to realise those securities at a loss to provide cash to transfer in accordance with the Amendment to the National Debt Commissioners.
Of course, this is not the only possible course of action. For example, the corporation might be called upon to repay part of its loan to the bank and might borrow to do so. We have considered this very carefully indeed. The most the Commissioners would do would be to accept Government securities in lieu of cash at the prices ruling on the day in question. My right hon. Friend has looked into this very carefully indeed, but to go further than this would be unacceptable in view of the essential point that the Exchequer must be protected against direct or indirect loss.
I recognise that this is a point on which there is some difference of opinion and that is why I wanted to explain it as fairly as I could to the Committee. I hope that with that explanation, the Committee will feel that my right hon. Friend has found a reasonable solution to this

problem of the Birmingham Municipal Bank. We recognise that a special position arises here, because there is not a trustee savings bank in Birmingham, because of the local Act, and because of the long and honourable history of the Birmingham Municipal Bank. I can assure the Committee that my right hon. Friend has done his very best to find a solution which will suit the great municipality of Birmingham and will safeguard the interests of the Treasury. This is the solution he proposes and I commend it to the Committee.

Mr. Roy Jenkins: The Economic Secretary is, of course, right in saying that there has been a great deal of negotiation on this matter since the earlier proceedings in Committee on the Bill. It is true, as he hinted, that we encountered difficulties in the course of these negotiations which, at first, we certainly had not anticipated. He was good enough to say to the Committee just now that if any words of his had led to a misunderstanding he wished to apologise, but he need not go too far in offering a personal apology, because I can assure him that the words of the Chancellor of the Exchequer went just as far as his own words and, if anything, a little further. Therefore, there is no feeling among Birmingham Members on this side of the Committee that the hon. Gentleman is personally responsible for any of the difficulties into which we ran.
We understood that provided the two principles—the 2½ per cent. fixed rate of interest and the payment of all moneys to the National Debt Commissioners could be accepted—there would be no difficulty, subject to negotiations, in allowing a special department of the Birmingham Municipal Bank, which would not be a trustee savings bank in name, to have the benefit of the Income Tax concession. There have been difficulties in negotiations about that, and there have been a great number of deputations and visits to London. Even though, perhaps unfortunately, those had to take place, we are glad indeed that they have led to some result and, without question, we accept the Amendment as it stands.
Do not let us think, however, that the Amendment is being too generous. As the Economic Secretary also pointed out,


it is being fairly sparing in the margins of rate of interest which it allows. In other words, the Birmingham Municipal Bank is not to receive from the National Debt Commissioners the full average rate of interest paid to the ordinary departments of trustee savings banks on the assumption that it would be a lower-cost bank.
There is also the rather more important question of the securities which are to be taken over. This, as the Economic Secretary and the Chancellor know, is a point which is causing very genuine concern to those associated with the Birmingham Municipal Bank at present. The position is that nobody can tell exactly how much money will be transferred from the general Municipal Bank accounts to the new special department. The total deposits at the bank are about £88 million and some proportion of that—no doubt not a purely negligible proportion—will be transferred to the new department. There will then be an immediate obligation upon the bank to transfer to the National Debt Commissioners cash to the extent of that transfer of deposits.
There is no difficulty and no dispute as to the future. As new money is paid into the special department, so it will automatically be paid over to the National Debt Commissioners. The problem is purely that of the transition period, because to realise this cash the bank will have to obtain money from some source or other, with the gilt-edged market in its present state, for which the Birmingham Municipal Bank certainly could not be held responsible.
In the investment policy which the bank has pursued over a number of years in close association with Treasury advice, there might have been marginal dispute as to what type of security might have been invested in on a particular date, but I do not think that there has been any broad dispute between the Chancellor's advisers and the bank as to its investment policy. Indeed, since the outbreak of the war, its investment policy, to meet the wishes of the Treasury, has been very different from that which the bank would have pursued if it had been left to itself and had been unconcerned with special national needs.
As a result of this policy, at any rate, the bank is in a position where it is worried about its liquidity ratio, and I

think that the Treasury agrees about this. The bank would like to be rather more liquid that it is at present, but the position in which the present arrangement is putting the bank will militate against its placing itself in a more liquid position, because if it has to dispose of securities the loss which it will incur will be greater if it disposes of long-term securities than if it disposes of short-term securities. This is a genuine dilemma for the bank at present.
The Economic Secretary might say that it might be possible for the corporation to pay back some money to the bank and itself borrow to do so. The bank has not been lending to the corporation for a considerable number of years, and the money which the bank has advanced to the corporation is, to a very large extent, represented by Government securities on that specific account held by the corporation itself. Therefore, there is not so much room for manoeuvre here. But if it were to be done, the corporation would have to borrow at a heavy rate of interest at present and, therefore, there would be possibly an additional liability upon the ratepayers of Birmingham.
There is very serious concern, therefore, about this matter of taking over securities. The Economic Secretary said that the Amendment did not make a provision for the taking over of securities at cost or book value. I think that the position is a little worse. The Amendment makes specific provision for the fact that they cannot be taken over. I wonder whether the hon. Gentleman can confirm that I am right in thinking that. The hon. Gentleman appears to be indicating assent. My hon. Friends greatly regret that. It makes the position of the bank unnecessarily difficult and may, if met by the solution which the Economic Secretary proposes, impose an unwarranted burden on the ratepayers. We are glad that the hon. Gentleman has gone some distance and, on this question of the taking over of securities, I hope that the Treasury will do everything in its power to recognise the short-term transitional difficulties which it may make for the bank and to ease that as far as lies in its power.

Mr. Geoffrey Lloyd: I thank my hon. Friend the Economic Secretary for his speech and thank him and the Chancellor of the Exchequer for


making this concession. The Birmingham Municipal Bank is unique. It was founded by the late Mr. Neville Chamberlain and was one of the chief of his social reform projects in his career as Lord Mayor and leader of Birmingham City Council. It has a quite special place in Birmingham, and it attracts to the service of thrift all the civic pride and enthusiasm of the local people. Everybody who knows Birmingham knows that that is true.
4.0 p.m.
Owing to the fact that it has, so to speak, scooped the pool of thrift in the Birmingham area—there is not even a trustee savings bank there—unless some provision were made the concession which the Chancellor has made to small savings generally could not have been applied to Birmingham without new and special arrangements that would have cut across the whole of the thrift arrangements in Birmingham. But although that is the case, and, therefore, the case for a concession is strong, we have to face the fact that to the mind of the administrator an exception is an abhorrent thing. Administrators do not like to make exceptions, and we must admit, in fairness, that to a large extent they may be correct, because it is difficult to make exceptions.
I am not at all sure that this concession would ever have been made if we had not been a parliamentary country, because both the hon. Gentleman the Member for Stechford (Mr. Roy Jenkins) and the Economic Secretary stressed the fact that not only have the Chancellor and the Economic Secretary come into this matter, but, also, all the Birmingham Members on both sides of the Committee have come into it. This is a concession for which we are extremely grateful to the Chancellor and to my hon. Friend.

Mr. Cyril Bence: It has been pleasant to listen to the thanks expressed by Birmingham Members for the concession made to the Birmingham Municipal Bank. In my constituency too we have a municipal bank, which was established in the ancient burgh of Kirkintilloch in 1920. This burgh seems to get a rough time at the hands of the Chancellor. Our municipal bank hands over to the local authority between £150,000 and £190,000

every year at an interest of about 3½ per cent. from the savings of the citizens of Kirkintilloch.
Now, as I understand it, Birmingham is satisfied if money is hived off to the National Debt Commissioners. Our municipal bank hives off all its funds to the local authority, and the interest given by the local authority is much lower than would be the case if it had to go on to the open market. Furthermore, this money represents the thrift of the Scottish people, especially of the people of Kirkintilloch, where there are no public houses. This is important, because it represents money which does not go into the breweries but into the local savings bank. That fact should be realised by all interested in saving.
That investment in the local authority is non-inflationary because it is taken out of the purchasing power of the people, whereas, if that money flowed to the National Debt Commissioners, the local authority would go on to the market and its borrowing would probably be inflationary because it would be met by new money created by the banks.
We were hoping that this concession to the Birmingham Municipal Bank would spread to Kirkintilloch. Indeed, I am surprised that the Birmingham Municipal Bank should be given this great opportunity to enjoy legislation passed by this House for itself alone, and my constituents in Kirkintilloch will be annoyed that the industrial city of Birmingham should enjoy this concession while the ancient burgh of Kirkintilloch is ignored. In the course of its history, our municipal bank lent £87,000 to the National Debt Commissioners but, being good local patriots with civic pride, now the money goes to the local authority, which is the right thing to do.
I understand that in order to have this concession extended to the Kirkintilloch Municipal Bank we would have to introduce a Private Bill. If that is the case, no wonder people advocate a Parliament in Scotland, because it is difficult for us to get any of these concessions for our thrifty people. It may well be that when people have a natural tendency to thrift there is no need to give them incentives, but if we have to legislate for incentives for those who are not thrifty by nature, they may get an advantage over the


naturally thrifty people. It is a serious state of affairs when we in Kirkintilloch have to suffer from this attitude of the Government, and I am shocked to think that to enable the investors in the Kirkintilloch Municipal Bank to get this concession of freedom from Income Tax it would be necessary to promote a Private Bill——

The Deputy-Chairman (Sir Rhys Hopkin Morris): If I understand the speech of the hon. Member, he is now providing his own answer that it does not come within the scope of the Amendment.

Mr. E. G. Willis: On a point of order, Sir Rhys. Surely it is in order to argue about the words in the Amendment, "savings bank maintained under a local Act", which is what I understand my hon. Friend is arguing.

The Deputy-Chairman: If I had understood the hon. Member in that sense, I would not have intervened.

Mr. Bence: My hon. Friend has correctly interpreted the impression I meant to give, Sir Rhys. I thought that was what I was doing, but I appreciate that I might not have been doing it as clearly as has my hon. Friend the Member for Edinburgh, East (Mr. Willis).
There are several such municipal banks in Scotland which have quite as long a history as that of the Birmingham Municipal Bank, and so I hope that wider consideration will be given to other municipal banks throughout the country. I am pleading especially for the one in the small burgh of Kirkintilloch, which is self-contained. I am afraid that it would be impracticable for that bank to hive off a certain amount to the National Debt Commissioners because it has become a part of the local authority, which relies on it to finance its activities.
I do not know whether we shall be introducing a Private Bill, but I hope that the Chancellor will give this matter further consideration between now and the next Budget in order to see what can be done to safeguard the municipal banks which have a long tradition of saving. This one has been established for 36 years. As a result of the proposals of the Chancellor, there may be a considerable outflow from the municipal banks as a result of the tax concession made on the initial interest rates from savings.

Mr. W. E. Wheeldon: I want to intervene briefly principally to neutralise some of the atmosphere of generosity and gratitude that has been conveyed this afternoon by the right hon. Gentleman the Member for Sutton Coldfield (Mr. Geoffrey Lloyd). In these days we hardly regard the right hon. Gentleman as a Birmingham Member, but we recognise his interest in the city and understand the work he has done, along with his colleagues, in connection with the Municipal Bank.

Mr. G. Lloyd: I hope the hon. Gentleman will remember that I represent the Erdington Ward of the City of Birmingham.

Mr. Wheeldon: That is so and Birmingham was generous enough to turn one of the wards into the division of Sutton Coldfield in order to make the position of the right hon. Gentleman quite safe.
On a previous stage of this Bill, we heard what we thought was a clear and unambiguous statement from the Chancellor as well as from the Economic Secretary. It was with surprise that we later heard there was some confusion about the position. I am sure that there was no duplicity on the part of the Economic Secretary and that it was a misunderstanding which we, and of course he, regret.
We must not get into our minds the idea that Birmingham and Birmingham's Municipal Bank will accept the Clause with open arms. It will be accepted with very mixed feelings. We are speaking about an institution unique in the country, which has done tremendously good work for Birmingham and for the country generally. The local people will not relish an Amendment at this stage which will merely restrict the bank, and they will accept it very reluctantly.
The Clause seems to put almost complete control into the hands of the Chancellor and the Treasury. They can tell Birmingham that unless it accepts this, that or the other, it shall not have the advantages which are bestowed on the Post Office and trustee savings banks. That is particularly so in regard to the point mentioned by my hon. Friend the Member for Stechford (Mr. Roy Jenkins), investments. For a number of years I


have been chairman of the Birmingham finance committee, and I know very well the difficulties that we have had to meet. Whatever may be said about the decision. I am sure hon. Members will agree that it was the duty of the city's traders and finance committee to do the best they could for the city, which they certainly did, and it is no fault of theirs that the realisation of investments today would mean a considerable loss to the city. It is hard that Birmingham should be penalised because the Treasury now says that it will not accept these securities.
I think the Birmingham Municipal Bank and the Birmingham City Council will give the matter very careful consideration. They may ultimately decide to come within the terms of this Measure. I am sure they will do so with considerable reluctance and will regard it as unfortunate that the Chancellor was not able, in the first instance in the Bill, to provide proper conditions whereby Birmingham could enjoy the favourable conditions which are at the moment bestowed upon the Post Office and trustee savings banks only.

Mr. Donald Chapman: I should not have intervened but for the remarkable speech of the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd), which implied that there had been a great Birmingham council of war, with him as the flag bearer at its head, and that a concession had been extorted from the Government as a result of such great activity.
I do not want to be ungenerous. I acknowledge that right hon. and hon. Gentlemen opposite have given some help. Nor do I particularly want to claim a proprietorial interest in the solution, about which my colleagues were rather angry when I suggested it in the first place. At the same time, it must be said that the greatest credit in the matter goes primarily to my hon. Friend the Member for Stechford (Mr. Roy Jenkins). He has worked very hard indeed, and has been in almost continuous attendance at the Treasury. I should not like it to be thought from the speech of the right hon. Member for Sutton Coldfield that this solution has been the result of a terrific all-party effort. What has happened has come about because of the very lively

Labour group of hon. Members from Birmingham.
The Economic Secretary has been very helpful all the way through, but I still think that if there is any possibility of negotiations on the basis of taking over the assets at their book values, every effort should be made to find a solution to the problem. I put this specific point to the hon. Gentleman during the Committee stage. Although he did not commit himself in reply, the general atmosphere of his reply—he rose in a friendly way and said that it was a fair point—gave my hon. Friends and myself the impression that the problem would be worked out in the way that I have suggested.
4.15 p.m.
I would say to the right hon. Member for Sutton Coldfield, in all friendliness, that, instead of the general felicitations which he was handing out to his own side, he should pay a tribute to my hon. Friend the Member for Stechford. I would say to the Economic Secretary that I still think he owes it to the City of Birmingham, because of the misunderstandings which have occurred, to try to be even more helpful than he has already been.

Mr. Bottomley: The Economic Secretary is always polite and considerate, and, like my hon. Friend the Member for Stechford (Mr. Roy Jenkins), I at once relieve him of any accusation of wilfully misleading the Committee, but, whereas he has gone some way to meet the point raised by my hon. Friends who represent Birmingham constituencies—not altogether satisfactorily, I would add—I join other hon. Members in saying that I doubt whether anything at all would have been achieved had it not been for the efforts of the group of Birmingham Labour Members led by my hon. Friend the Member for Stechford.
I ask the Economic Secretary to recognise that those who raise the position of savings banks at Kirkintilloch, Clydebank, Airdrie, Motherwell, Walthamstow and Barnsley have no reason at all to be satisfied, because the Economic Secretary said that what applied to the Birmingham Municipal Bank could equally apply to these other banks.

Sir E. Boyle: No, Sir Rhys. The extension of the concession is confined to savings banks maintained under local Acts. Other local authorities with


similar powers which are not used are Cardiff and Birkenhead. The banks in Scotland to which the right hon. Gentleman has referred were formed under the Companies Act and would not be concerned with the Amendment at all.

Mr. Bottomley: I am sure the Economic Secretary will not mind if I refer him to what he said on 7th June. His words were:
The suggestion made by the hon. Member for Stechford (Mr. Roy Jenkins), to which, on behalf of my right hon. Friend, I agreed, could equally well have been accepted from the right hon. Member for Rochester and Chatham (Mr. Bottomley) …"—[OFFICIAL REPORT, 7th June, 1956; Vol. 553, c. 1385–6.)
The suggestion that I made was that these banks should have been put in the same category as the Birmingham Municipal Bank, but I will not pursue the matter now.
I would only make an appeal to the right hon. Gentleman. He did a very good job for local government in creating municipal enterprise and encouraging local authorities to take a more active part. I ask him to continue that good work. There are only a few of these banks. Is it not possible somehow to enable such civic pride to be developed?
The right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) referred to the civic pride in Birmingham and rightly claimed that a former prominent Conservative politician was responsible for the Birmingham Municipal Bank. It was, however, equally the Conservative Party which prevented any other bank developing, except the ones which have been mentioned, and they had to come into being by a different method. Although they did not come about as the result of a local Act, they are savings banks conducted by municipal enterprise, and I hope that even now the Chancellor will somehow find a way to recognise another aspect of municipal enterprise.

The Deputy-Chairman: The Question is——

Mr. Willis: Are we not to hear from the Economic Secretary why it has been found impossible to include other municipal banks? It is unsatisfactory that something should be given to the Birmingham Municipal Bank, but not to other municipal banks. Why could it not be done? What are the difficulties standing in the way? The banks are in practically

the same position, and are performing the same functions. Why could it not be extended?

Sir E. Boyle: Perhaps I may explain to the hon. Member for Edinburgh, East (Mr. Willis) that any bank such as that which the right hon. Member for Rochester and Chatham (Mr. Bottomley) mentioned which forms a special department as a trustee savings bank could take advantage of this Clause.
As I said during the earlier Committee proceedings, the point of this Amendment is that it is confined to the cases of those savings banks maintained under local Acts, and that the Kirkintilloch and the other Scottish banks are in quite a different position, having been formed under the Companies Acts. Provided that they were ready to form a special investment department as a trustee savings bank, all these could get the benefit of this Clause.
Amendment agreed to.
Further Amendment made: In page 8, line 37, at end insert
and 'seamen's savings bank' means a bank maintained under section one hundred and forty-eight of the Merchant Shipping Act. 1894".—[Sir E. Boyle.]
Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. F. Beswick: The complicated Amendments which we have just discussed illustrate the difficulties in which the Government find themselves once they start discriminating as between one kind of small savings and another. It seems to me that is a bad thing to do. Small savings of all kinds ought to be encouraged in this country at present, and we greatly regret that another Amendment which was put down at an earlier stage of the Bill was not accepted, and was not even considered, as we thought, by the Government.
In this Clause, we are accepting a new principle. It is that small savings that go directly to the Government are a good thing, and that small savings that do not go directly to the Government, or which may go to them indirectly or may indeed go to other good, useful and constructive purposes, are less good. That is the new state of affairs into which the Government have landed themselves, and I think


it is a bad state of affairs. The Government should encourage thrift as a whole, and not only thrift for one particular purpose.
As a result of the Clause, the Government will discourage and offend institutions and people who have for many years encouraged and developed the idea of thrift among both young people and older people. I see that the Economic Secretary is smiling at the suggestion that the Government should encourage thrift. I was brought up to believe that thrift was a good thing. I always remember investing my first two or three pennies in a co-operative penny bank, and I still remember the legend over the doorway, "Take care of the pence, and the pounds will take care of themselves." That is an admirable thrift institution, but one against which the Government are now discriminating through this Clause, and I feel that in passing it we ought to register a protest.
No one regrets the fact that a method has been found by which the Birmingham Municipal Savings Bank can be encouraged, but we should like the concession to go much further. In the long run, I believe that the Government will be doing a disservice both to themselves and the country in making this differentiation between one type of small savings and another.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 10.—(OFFICES AND EMPLOYMENTS.)

The Financial Secretary to the Treasury (Mr. Henry Brooke): I beg to move, in page 9, line 3, after "assessment", to insert:
(and the emoluments are not excepted as foreign emoluments).
Perhaps it would be for the convenience of the Committee to discuss at the same time the next two Amendments on the Notice Paper, in lines 6 and 18. There is also a consequential Amendment to the Second Schedule, in page 54, line 49, to insert a new paragraph (3).
These Amendments give effect to a statement which my right hon. Friend the Chancellor of the Exchequer made during the earlier Committee stage about the taxation of people working in this coun-

try for overseas concerns. He said that he would bring forward on Report Amendments which would have the general effect of restoring the existing position for persons domiciled overseas who work in the United Kingdom for overseas employers. Such persons who have hitherto been liable on what has been called the remittance basis will continue to be liable on that basis and not on their full pay.
These Amendments are designed to give effect to that statement by excluding from Cases I and II emoluments which are foreign emoluments, as defined in the third of the Amendments as—
emoluments of a person not domiciled in the United Kingdom from an office or employment under or with any person, body of persons or partnership resident outside, and not resident in, the United Kingdom.
The effect will be that foreign emoluments will be chargeable only under Case III on the amount received in the United Kingdom. In order to qualify for this relief, the holder of the office or employment will have to show that he is not domiciled in the United Kingdom, and also that he holds his office or employment under this wording:
under or with any person, body of persons or partnership, resident outside, and not resident in, the United Kingdom.
The Committee may hesitate at these curious words:
resident outside, and not resident in, the United Kingdom.
They are designed to cover the possible case of an international body which, it might be contended, was not resident anywhere. At any rate, that is the purpose of the words—to put that matter beyond doubt.
The method by which the Chancellor is proposing to the Committee that this change in the Bill should be carried out is simple, and probably requires no further explanation. His announcement when the Clause was originally discussed—it was then Clause 9—was generally welcomed on both sides of the Committee. There were questions asked as to the extent to which other countries gave similar treatment in their tax laws. That is an interesting question, but it is not really the vital question here. The vital question is what would be likely to happen if the Clause were left unamended. In order to draw a conclusion about that, one has to look primarily at the rates of


tax and the liability to tax that a person would suffer in this country if the Clause remained unamended, as compared with what he would suffer if he stayed elsewhere or went elsewhere.
For example, we have to consider whether Americans would find the rates of British taxation so penal that they would be unwilling to come to work here, even though we might greatly need their technical services. We have to examine separate but similar types of case where people from overseas, who are now working in this country, might if we left the Clause unamended think very carefully whether they could not carry on the work they were doing on this side of the Atlantic just as well in Paris or Brussels as in London. If hon. Members will examine the relative tax liabilities which they would incur in France or Belgium, they will see at once that it is our exceedingly high rates of direct taxation which would have a profound effect on the probable decisions of such people.
4.30 p.m.
I recognise that in bringing forward these Amendments we are departing from the strict recommendations of the Royal Commission, but that was what my right hon. Friend said when we discussed the matter before. Expediency had to prevail over logic in this case. The Royal Commission sought to produce tidy and rounded recommendations, but this is a hard and practical world. The Committee have to examine what will happen if we keep the Royal Commission's recommendations intact in the Bill.
It was not the business of the Royal Commission to inquire into the relative tax advantages which these people could get by staying away from this country or by moving across the Channel to the Continent. These are practical matters which any Government would have to take into consideration. Because we have come to the conclusion that it would be contrary to the national interest to enforce the full rigour of the law as defined in the original Clause, my right hon. Friend has decided to recommend the Committee to amend the Bill in this respect.

Mr. Beswick: The Financial Secretary says that the Amendments follow the statement made by the Chancellor earlier in the Committee stage. It is unfortunate

that he has yielded so easily on this point. The Amendments do not follow any principle at all. Both the Financial Secretary and the Chancellor confess that the Amendments are based upon expediency, and are designed to get us, they feel, some advantage in the short run. My opinion is that they will place us at a disadvantage in the long run.
If we go back to the position which existed before the Finance Bill was drafted, it is clear that there were people in this country, foreign citizens, who to a very large extent escaped taxation on their emoluments because of the difference between the tax laws of this country and the tax law in the country of origin of the companies for which they worked. It was possible so to arrange their affairs that they did not pay Income Tax on the greater part of their incomes.
Apparently the Royal Commission agreed that that was wrong and that the position should he set right. The Financial Secretary says that the Royal Commission did not take into account certain consequential effects which the original Clause might have had, but surely the Chancellor and the Government ought to have taken account of any consequential effects that might have arisen when they agreed to the inclusion of the original Clause. Did they not consider the matter in its broader aspects before they agreed to the changes going into the original Bill? Are we to understand that they accepted the drafting without giving any thought to the changes or redispositions that might be made by foreign firms operating in this country?
The same factors still exist and the position is not changed at all, save in one respect; that is, that the foreign firms have made their representations—and not the foreign firms always, but the foreign citizens resident in this country. They have suggested that they will take their businesses elsewhere unless changes are made. I have heard those representations described as "blackmail". Certainly, very strong pressure was exerted. I regret very much that the Government have yielded so easily. I admit that we are dealing only with individuals and not with companies and that the total amount involved is not very great compared with the concessions made in Section 39 of the Finance Act, 1947, which enabled foreign concerns to escape the full impact of


Profits Tax, Compared with that, the impact of the concession we are now discussing is very small.
But the arrangements laid down in the Finance Act, 1947, were reciprocal. When I called the attention of the Financial Secretary to that Section 39 he said that the advantage which foreign concerns gained from the operations of their companies in this country had their counterpart in the reliefs given to United Kingdom companies operating in corresponding circumstances in the United States. His excuse was that it was a matter of reciprocity; but there is no reciprocity in the concession that we have now made.
What thought are the Government giving to the possibility of getting reciprocity? Even if the financial results were not very great, dignity would, at any rate, be satisfied. There would be more possibility of our holding up our heads and saying that we did not always give in, particularly to pressure from the other side of the Atlantic. Many years ago in Sunday School I used to sing a hymn which contained this line:
Each victory will help you some other to win.
We might change that and say: "Each concession compels us some other to yield." Every time we make another concession of this kind it puts us into a weaker position which compels us to make another concession later on.
We might well ask ourselves if we are not much stronger than is sometimes indicated by the Government. We ought to say that it does not pay us in the long run to make these concessions so easily. In this case there is no question of unfairness to the individuals concerned. If they had been asked to pay at least the rate of tax which they would pay if the money had been earned in their own country, that would be reasonable. I could have understood it.
Switzerland makes special ad hoc arrangements with foreign firms operating there. So far as I know, no attempt has been made by the Government to make similar arrangements in this country. The Government have quite simply and easily yielded to the pressure of these foreign residents and have said that whatever money is earned in this society—which is kept going in its social arrangements by our taxation system—taxation

will not be levied on it. It has been suggested that the individuals concerned may well have commitments in their home countries such as children to educate and dependants to keep, for which a part of their emoluments has to be sent to their own country.
Suppose, however, that the children are not resident in that home country, but in this country. Suppose that in time of sickness these individuals avail themselves of our National Health Service, which is financed out of our taxation. Government supporters have criticised time after time the arrangements under which foreign residents can have the benefit of the National Health Service. They have said that it was a bad thing.
But here we have a situation in which it may well be that individuals who earn their bread and butter here are not making their full contribution to our social services although they probably avail themselves of those services in time of need. This seems to be wrong in principle. When this proposal was first put forward I felt that the Chancellor of the Exchequer was a little uneasy about it. I do not believe that he was very enthusiastic about the concession. He seemed to recognise that a principle was involved, and I do not think that he really wanted to go back upon it, even though he has since put down these Amendments.
Even now I hope that he will say either that money earned here must pay its full rate of tax, and that the double taxation provisions will apply anyhow, or, at any rate, that taxation shall be applied up to the level to which it would be paid at the rates existing in the country of origin of the foreign resident concerned. I should have thought that that would be a reasonable approach. No attempt has been made at a compromise, and I feel that we should vote against these Amendments.

Mr. F. A. Burden: Most hon. Members probably welcome the Amendments which my right hon. Friend has put down. If the hon. Member for Uxbridge (Mr. Beswick) will give the matter a little careful thought, I think that he, too, will agree that in this instance the Chancellor has taken the wise and reasonable course.
We should all like to see persons who come here charged reasonable Income Tax and not given special concessions, but in this case the whole question is whether or not the action proposed originally would react to the detriment of our export trade. I move among many exporters, and many Americans and Canadians who are resident in this country, and I am quite sure that if the Clause had been adopted in its original form it would have reacted very detrimentally to our export trade. Many of those who come to operate here do so because of their special qualities. They are extremely highly paid and very highly qualified in their own countries. If the course originally proposed had been followed, the effect would have been to reduce their standard of living when they came here.

Mr. Beswick: No.

Mr. Burden: I will give way to the hon. Member in a moment. These people are in a position to play a vitally important part in stimulating our export trade, as they do.

Mr. Beswick: I wonder whether the buyers to whom the hon. Member is referring come here to buy our goods, which they feel are worth buying, or because they know they are going to get some tax concessions. Surely the prior consideration in these matters is the decision by the parent company as to the country in which it thinks it can best buy goods for its home market.

Mr. Burden: But if they are extremely good buyers, and are told, "If you go to England the standard of living that you will enjoy there will be very much lower than it is here," those buyers will put up the utmost resistance to coming here.

Mr. Beswick: indicated dissent.

4.45 p.m.

Mr. Burden: I assure the hon. Member that that is so. They play an absolutely vital part in our export drive. They can assist very considerably in styling British merchandise for the American market. They know their home trade; they have served in it and have bought for it, and because they know their markets so well they know what sort of styling is required.
I can give the hon. Member an example of this, which came to my notice this morning. A certain British buying organisation, which had no American stylist, sent a large order of British men's pyjamas to America. They stuck in the stores there. A representative went over and investigated the matter. The reason for their unsaleability was a very simple one. The pyjamas did not sell because the Americans hang their pyjamas up, whereas in this country it is usual for pyjamas to be put under the pillow. The pyjamas that were sent out there had no tabs by which they could be hung up. Tabs were put on in future shipments and American sales went ahead. That is an instance of the sort of thing upon which American buyers can give advice and guidance.
The hon. Member for Uxbridge smiles, but it is a simple point, and absolutely vital in merchandising. These men have the "know-how ". They come here to find goods to sell in America. They are here searching the British market the whole time. They assist British manufacturers who may produce very high quality merchandise but work upon a small scale in small factories and so cannot afford to send representatives to the United States. It is the job of these American buyers to find and assist those firms in the matter of styling and packaging, and to ensure that prompt deliveries are maintained.
These people stimulate old sources of supply and create new ones. They are vital to our export trade. It is imperative that they should come here, and also that we should attract more of them. If the Clause had been passed as originally drafted, I believe that there would have been a resistance on the part of those people to coming here. Instead, many would have gone to the Continent, where they would have set up their buying organisations and sought out sources of supply in respect of goods which they can and do find in this country now They prefer to come here because difficulties of language which they experience on the Continent do not exist here.
Already many organisations are being set up on the Continent to compete with us in the sale of these goods, and if we allow this process to continue we shall suffer very considerably in the long run.

Mr. Edward Evans: Does the hon. Member agree that these men are being subsidised by our taxpayers? Should not their emoluments be provided by their own organisations?

Mr. Burden: The hon. Member says that they are being subsidised, but that is not so. They are being paid by overseas companies and are paying full tax upon that part of their salaries which they bring and use here. A very important point to bear in mind—which I am sure my right hon. Friend has taken into consideration in putting forward these Amendments—is that because many of these men are under contract to overseas concerns they pay very considerable sums towards pension schemes at the source of their incomes, which is in the United States. If the Clause had gone through in its original form, undoubtedly those men would have had to cut their pension schemes considerably, unless the American concerns had agreed to boost up their payment to compensate for that which they would have lost as a result of taxation. I am of the opinion that in many cases such a course would have been resisted by the American firms.
There is one point upon which I should like guidance from my right hon. Friend. It concerns the case of Englishmen—I have one particular case in mind, and there are others—who went to America and joined American companies with every intention of living in America. Then, because of their knowledge—having lived in the States for some time and become domiciled there—they return to this country to operate from the London office of their firm but with an American or a Canadian contract. I wish to know whether, under the Bill as it is amended, the incomes of such people will be treated as of old; that is, that they will pay tax only on that part of their income which they bring into this country; and whether, to all intents and purposes, otherwise they will be in the position of the Americans who come here.
The reason such men come back to this country is because of their knowledge. I believe that the concession should apply to them because, with their British background and American experience, their influence as executive heads is vital in the case of American, Canadian and other overseas buying agencies such as I have indicated. I should be grateful if

my right hon. Friend would clarify that point for me, and I hope that the concession will apply to such men.
I consider the decision taken today by my right hon. Friend an extremely wise one, though from the point of view of taxation it appears to be a generous course to adopt. The amount which he would receive by way of taxation would probably be about half a million. But the amount we should lose in exports, and the reduced possibility of new American companies coming to this country, would be very much more. It is the case now that new American companies coming to this country have to retain their highly trained executives here for an initial period of perhaps four years until they have taught our people the know-how. I believe it vital to the future of the export trade of this country that these people be encouraged to come here; and at the cost of the pittance which we might otherwise gain in taxes I think this a step well worth while. I appreciate the point made by the hon. Member for Uxbridge, and emotionally one is in full sympathy with him. But here it is a case of practical business, and that is what must sway us.

Mr. Douglas Jay: The trouble about the attitude of the Government to this problem is that they skip light-heartedly—or perhaps one should say light-headedly—from one extreme to another without, so far as we can see, making any attempt to find a reasonably practical compromise. We are now discussing how we should tax that part of the income earned here, by someone working and resident in this country, but domiciled elsewhere, which is not remitted to this country.
Before the Chancellor rushed in with Clause 9 of this Bill as it was previously, it was only the part of the income remitted here which came under the weight of British taxation. That was criticised by the Royal Commission on the Taxation of Profits and Income; and then, presumably after fully considering all these matters which the Financial Secretary has mentioned and the economic consequences, the Chancellor adopted the whole of the Commission's proposals, marched bravely up the hill and presented the proposals in that form to the Committee.
At the time I ventured to say that I thought there was something in the argument now advanced by the hon. Member for Gillingham (Mr. Burden), that if we had gone to that logical extreme it might have had certain undesirable consequences. The Chancellor, having embraced logic up to that point, told us that he thought expediency had to be taken into account as well. We suggested that it might be possible to find a compromise between the extremes of logic and expediency. I said that we could not see why all these foreign nationals living in this country should pay no tax at all in either country on that part of their income earned here which was not remitted here. That is what the position will be, if the present proposal of the Chancellor is accepted.
I do not see, and I do not think the Government have explained, why it is not possible to find a suitable compromise. My hon. Friend the Member for Uxbridge (Mr. Beswick) suggested that it might be practicable to tax, on that part of the income not remitted here, such a sum as would have been due in taxation had it been normally subject to tax in the other country. Alternatively, I suppose we might take a certain proportion of the untaxed income and subject it to British taxation. Or again, my hon. Friend says that in Switzerland, to take one example, it has been found possible to make ad hoc arrangements for each taxpayer. I am not saying which compromise would be possible, but I had hoped that the Chancellor, having given more consideration than we can to these and other ideas, would find it possible to discover a resting point between these two extremes.
However, the Chancellor has not done that. He has rushed back to the other extreme and surrendered unconditionally at the first sight of the enemy or, rather, at the first sight of the hon. and learned Member for Northwich (Mr. J. Foster), who originally raised the banner of revolt. Having run right round the course on the grounds of logic, we are not satisfied that it is necessary to run the whole way back on the grounds of expediency. If logic had such force that the Chancellor, having thought over the whole matter, was prepared originally to put this Clause in 100 per cent. form in this Bill, logic must have some force, even though weighted against expediency. We do not feel that the case has been made out for

this unconditional surrender by what the Financial Secretary said.
Although the Chancellor has made one of his rare appearances in the Committee, he has not had the face to get up and advance this unconvincing case himself. We remain far from satisfied by what has been said so far by the Financial Secretary.

Mr. F. M. Bennett: I wish to applaud the Chancellor for having taken this step but to repudiate completely the suggestion that it is taken solely on the grounds of expediency. That deals with the remarks of the right hon. Member for Battersea, North (Mr. Jay).
I do not think one could do better than read an extract from The Times leader of Tuesday, 5th June:
If general salary levels were the same in all countries, it would be fair.
That is, the proposal as it was before the Amendment today.
But is the British tax scale appropriate to the whole pay of Americans working for American firms in this country? They have always been taxed on the British scale on the portion of their pay which is remitted to—and, therefore, presumably spent in—this country. That is just. But most have continuing responsibilities—for family expenses, education, life assurance and pension funds—which are payable in their own countries and remain related to the dollar economy with its higher pitched scale of taxable incomes. These responsibilities are normally covered by the portions of their pay left in America. It is hardly just that these amounts should be brought into income taxed on the United Kingdom scale, which is designed for lower levels of income and expenditure.

5.0 p.m.

Mr. Beswick: I appreciate that point. What I cannot appreciate is how the other American citizens who also have family responsibilities, insurance, education, health and other responsibilities, manage to get along while paying tax at the American rate.

Mr. Bennett: It is not for the Committee to decide the scale of tax applicable within the United States. It is not fair to impose our scale of tax, which is related to our sort of economy, on the American economy with the responsibilities that go with it. That is the point I am making.
It would be a pity if we accepted that this Amendment was put forward only on the grounds of expediency. It is thoroughly justified on grounds of principle as well.
I cannot see either why the Chancellor should be accused of going from one extreme to the other, considering that all he has done in this respect is to revert to the law as it was. That position seemed to be quite satisfactory to right hon. And

hon. Gentlemen opposite during the six years of their tenure of office.

Question put, That those words be there inserted:—

The Committee divided: Ayes 256, Noes 204.

Division No. 256.]
AYES
[5.2 p.m.


Agnew, Cmdr. P. G
Foster, John
Linstead, Sir H. N.


Aitken, W. T.
Freeth, D. K.
Lloyd, Maj. Sir Guy (Renfrew, E.)


Allan, R. A. (Paddington, S.)
Galbraith, Hon. T. G. D.
Lloyd, Rt. Hon. Selwyn (Wirral)


Alport, C. J. M.
George, J. C. (Pollok)
Lloyd-George, Maj. Rt. Hon. G.


Amery, Julian (Preston, N.)
Gibson-Watt, D.
Longden, Gilbert


Amory, Rt. Hn. Heathcoat (Tiverton)
Glover, D.
Lucas, Sir Jocelyn (Portsmouth, S.)


Anstruther-Gray, Major Sir William
Godber, J. B.
Lucas-Tooth, Sir Hugh


Armstrong, C. W.
Gomme-Duncan, Col. Sir Alan
McAdden, S. J.


Ashton, H
Gough, C. F. H.
Mackeson, Brig. Sir Harry


Astor, Hon. J. J.
Gower, H. R.
Mackie, J. H. (Galloway)


Atkins, H. E.
Graham, Sir Fergus
McLaughlin, Mrs. P.


Baldock, Lt.-Cmdr. J. M.
Grant, W. (Woodside)
Maclay, Rt. Hon. John


Baldwin, A. E.
Grant-Ferris, Wg Cdr. R. (Nantwich)
Maclean, Fitzroy (Lancaster)


Balniel, Lord
Green, A.
McLean, Neil (Inverness)


Barber, Anthony
Grimond, J.
MacLeod, John (Ross &amp; Cromarty)


Barlow, Sir John
Grimston, Hon. John (St. Albans)
Macmillan, Rt. Hn. Harold (Bromley)


Barter, John
Grimston, Sir Robert (Westbury)
Maddan, Martin


Baxter, Sir Beverley
Hall, John (Wycombe)
Maitland, Cdr. J. F. W. (Horncastle)


Beamish, Maj. Tufton
Hare, Rt. Hon. J. H.
Maitland, Hon. Patrick (Lanark)


Bell, Ronald (Bucks, S.)
Harris, Frederic (Croydon, N.W.)
Manningham-Buller, Rt. Hn. Sir R.


Bennett, F. M. (Torquay)
Harrison, Col. J. H. (Eye)
Markham, Major Sir Frank


Bevins, J. R. (Toxteth)
Harvey, Ian (Harrow, E.)
Marlowe, A. A. H.


Bidgood, J. C.
Harvey, John (Walthamstow, E.)
Marshall, Douglas


Biggs-Davison, J. A.
Harvie-Watt, Sir George
Mathew, R.


Birch, Rt. Hon. Nigel
Hay, John
Maudling, Rt. Hon. R.


Bishop, F. P.
Head, Rt. Hon. A. H.
Mawby, R. L.


Black, C. W.
Heath, Rt. Hon. E. R. G.
Maydon, Lt.-Comdr. S. L. C.


Body, R. F.
Henderson, John (Cathcart)
Medlicott, Sir Frank


Bossom, Sir Alfred
Hill, Rt. Hon. Charles (Luton)
Milligan, Rt. Hon. W. R.


Boyd-Carpenter, Rt. Hon. J. A.
Hill, Mrs. E. (Wythenshawe)
Molson, Rt. Hon. Hugh


Braine, B. R.
Hill, John (S. Norfolk)
Monckton, Rt. Hon. Sir Walter


Braithwaite, Sir Albert (Harrow, W.)
Hinchingbrooke, Viscount
Moore, Sir Thomas


Brooke, Rt. Hon. Henry
Hirst, Geoffrey
Nabarro, G. D. N.


Brooman-White, R. C.
Holland-Martin, C. J.
Nairn, D. L. S.


Browne, J. Nixon (Craigton)
Holt, A. F.
Nicholls, Harmar


Buchan-Hepburn, Rt. Hon. P. G. T.
Hornby, R. P.
Nicholson, Godfrey (Farnham)


Burden, F. F. A.
Hornsby-Smith, Miss M. P.
Nicolson, N. (B'n'm'th, E. &amp; Chr'ch)


Butcher, Sir Herbert
Horobin, Sir Ian
Noble, Comdr. A. H. P.


Campbell, Sir David
Horsbrugh, Rt. Hon. Dame Florence
Nugent, G. R. H.


Channon, H.
Howard, Hon. Greville (St. Ives)
Oakshott, H. D.


Chichester-Clark, R.
Howard, John (Test)
Ormsby-Gore, Hon. W. D.


Clarke, Brig. Terence (Portsmth, W.)
Hughes Hallett, Vice-Admiral J.
Orr, Capt. L. P. S.


Cole, Norman
Hughes-Young, M. H. C.
Page, R. G.


Cooper, Sqn. Ldr. Albert
Hurd, A. R.
Partridge, E.


Cooper-Key, E. M.
Hutchison, Sir Ian Clark (E'b'gh, W.)
Peyton, J. W. W.


Cordeaux, Lt.-Col. J. K.
Hutchison, Sir James (Scotstoun)
Pilkington, Capt. R. A.


Corfield, Capt. F. V.
Hyde, Montgomery
Pitman,


Craddock, Beresford (Spelthorne)
Hylton-Foster, Sir H. B. H.
Pitt, Miss E. M.


Crouch, R. F.
Iremonger, T. L.
Pott, H. P.


Crowder, Sir John (Finchley)
Irvine, Bryant Godman (Rye)
Powell, J. Enoch


Crowder, Petre (Ruislip—Northwood)
Jenkins, Robert (Dulwich)
Prior-Palmer, Brig. O. L.


Cunningham, Knox
Jennings, J. C. (Burton)
Profumo, J. D.


Dance, J. C. G.
Johnson, Dr. Donald (Carlisle)
Raikes, Sir Victor


Davidson, Viscountess
Johnson, Eric (Blackley)
Rawlinson, Peter


Davies, Rt. Hon. Clement (Montgomery)
Johnson, Howard (Kemptown)
Redmayne, M.


D'Avigdor-Goldsmid, Sir Henry
Joseph, Sir Keith
Rees-Davies, W. R.


Deedes, W. F.
Joynson-Hicks, Hon. Sir Lancelot
Remnant, Hon. P.


Dodds-Parker, A. D.
Keegan, D.
Renton, D. L. M.


Donaldson, Cmdr. C. E. McA.
Kerby, Capt. H. B.
Ridsdale, J. E


Doughty, C. J. A.
Kerr, H. W.
Rippon, A. G. F.


Drayson, G. B.
Kershaw, J. A.
Robertson, Sir David


du Cann, E. D. L.
Kimball, M.
Rodgers, John (Sevenoaks)


Dugdale, Rt. Hn. Sir T. (Richmond)
Kirk, P. M.
Roper, Sir Harold


Duncan, Capt. J. A. L.
Lagden, G. W.
Ropner, Col. Sir Leonard


Duthie, W. S.
Lambert, Hon. G.
Russell, R. S.


Eden, Rt. Hn. Sir A. (Warwick &amp; L'm'tn)
Lancaster, Col. C. G.
Schofield, Lt.-Col. W.


Eden, J. B. (Bournemouth, West)
Langford-Holt, J. A.
Scott-Miller, Cmdr. R.


Elliot, Rt. Hon. W. E.
Leather, E. H. C.
Sharples, R. C.


Errington, Sir Eric
Leavey, J. A.
Simon, J. E. S. (Middlesbrough, W.)


Finlay, Graeme
Leburn, W. G.
Smyth, Brig. Sir John (Norwood)


Fisher, Nigel
Legge-Bourke, Maj. E. A. H.
Soames, Capt. C.


Fletcher-Cooke, C.
Lindsay, Hon. James (Devon, N.)
Spearman, Sir Alexander


Fort, R.
Lindsay, Martin (Solihull)





Speir, R. M.
Thompson, Lt.-Cdr. R. (Croydon, S.)
Ward, Dame Irene (Tynemouth)


Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)
Thornton-Kemsley, C. N.
Waterhouse, Capt. Rt. Hon. C.


Stevens, Geoffrey
Tiley, A. (Bradford, W.)
Whitelaw, W.S.I. (Penrith &amp; Border)


Steward, Harold (Stockport, S.)
Tilney, John (Wavertree)
Williams, Paul (Sunderland, S.)


Stewart, Henderson (Fife, E.)
Turner, H. F. L.
Williams, R. Dudley (Exeter)


Stoddart-Scott, Col. M.
Turton, Rt. Hon. R. H.
Wills, C. (Bridgwater)


Stuart, Rt. Hon. James (Moray)
Tweedsmuir, Lady
Wilson, Geoffrey (Truro)


Studholme, Sir Henry
Vane, W. M. F.
Wood, Hon. R.


Summers, Sir Spencer
Vickers, Miss J. H.
Woollam, John Victor


Taylor, William (Bradford, N.)
Vosper, D. F.
Yates, William (The Wrekin)


Teeling, W.
Wakefield, Edward (Derbyshire, W.)



Thomas, Leslie (Canterbury)
Walker-Smith, D. C.
TELLERS FOR THE AYES:


Thomas, P. J. M. (Conway)
Wall, Major Patrick
Mr. Legh and Mr. Bryan.


Thompson, Kenneth (Walton)
Ward, Hon. George (Worcester)





NOES


Ainsley, J. W.
Griffiths, Rt. Hon. James (Llanelly)
Paling, Rt. Hon. W. (Dearne Valley)


Albu, A. H.
Hale, Leslie
Paling, Will T. (Dewsbury)


Allaun, Frank (Salford, E.)
Hall, Rt. Hn. Glenvil (Colne Valley)
Palmer, A. M. F.


Allen, Arthur (Bosworth)
Hamilton, W. W.
Pannell, Charles (Leeds, W.)


Allen, Scholefield (Crewe)
Hannan, W.
Pargiter, G. A.


Anderson, Frank
Harrison, J. (Nottingham, N.)
Parker, J.


Awbery, S. S.
Hastings, S.
Parkin, B. T.


Bacon, Miss Alice
Hayman, F. H.
Pearson, A.


Baird, J.
Healey, Denis
Plummer, Sir Leslie


Balfour, A.
Henderson, Rt. Hn. A. (Rwly Regis)
Popplewell, E.


Bence, C. R. (Dunbartonshire, E.)
Herbison, Miss M.
Price, J. T. (Westhoughton)


Benn, Hn. Wedgwood (Bristol, S. E.)
Hobson, C. R.
Probert, A. R.


Benson, G.
Holman, P.
Proctor, W. T.


Beswick, F.
Holmes, Horace
Pryde, D. J.


Blackburn, F.
Howell, Denis (All Saints)
Randall, H. E.


Blenkinsop, A.
Hoy, J. H.
Rankin, John


Boardman, H.
Hubbard, T. F.
Redhead, E. C.


Bottomley, Rt. Hon. A. G.
Hughes, Cledwyn (Anglesey)
Reid William


Bowden, H. W. (Leicester, S. W.)
Hughes, Emrys (S. Ayrshire)
Robens, Rt. Hon. A.


Bowles, F. G.
Hughes, Hector (Aberdeen, N.)
Roberts, Albert (Normanton)


Boyd, T. C.
Hunter, A. E.
Roberts, Goronwy (Caernarvon)


Braddock, Mrs. Elizabeth
Hynd, J. B. (Attercliffe)
Robinson, Kenneth (St. Pancras, N.)


Brockway, A. F.
Isaacs, Rt. Hon. G. A.
Shinwell, Rt. Hon. E.


Broughton, Dr. A. D. D.
Janner, B.
Shurmer, P. L. E.


Burke, W. A.
Jay, Rt. Hon. D. P. T.
Silverman, Julius (Aston)


Burton, Miss F. E.
Jeger, George (Goole)
Silverman, Sydney (Nelson)


Butler, Herbert (Hackney, C.)
Jeger, Mrs. Lena (Holbn &amp; St. Pncs, S.)
Simmons, C. J. (Brierley Hill)


Callaghan, L. J.
Jenkins, Roy (Stechford)
Skeffington, A. M.


Castle, Mrs. B. A.
Johnson, James (Rugby)
Slater, J. (Sedgefield)


Champion, A. J.
Jones, Rt. Hon. A. Creech (Wakefield)
Smith, Ellis (Stoke, S.)


Chapman, W. D.
Jones, David (The Hartlepools)
Sorensen, R. W.


Chetwynd, G. R.
Jones, Elwyn (W. Ham, S.)
Steele, T.


Clunie, J.
Jones, T. W. (Merioneth)
Stewart, Michael (Fulham)


Coldrick, W.
Kenyon, C.
Strachey, Rt. Hon. J.


Collick, P. H. (Birkenhead)
Key, Rt. Hon. C. W.
Summerskill, Rt. Hon. E.


Collins, V. J. (Shoreditch &amp; Finsbury)
King, Dr. H. M.
Swingler, S. T.


Corbet, Mrs. Freda
Lawson, G. M.
Soskice, Rt. Hon. Sir Frank


Cove, W. G.
Lee, Frederick (Newton)
Thomas, George, (Cardiff)


Craddock, George (Bradford, S.)
Lever, Leslie (Ardwick)
Thomas, Iorwerth (Rhondda, W.)


Cronin, J. D.
Lindgren, G. S.
Thomson, George (Dundee, E.)


Crossman, R. H. S.
Lipton, Lt.-Col. M.
Thornton, E.


Cullen, Mrs. A.
Logan, D. G.
Timmons, J.


Daines, P.
Mabon, Dr. J. Dickson
Tomney, F.


Dalton, Rt. Hon. H.
MacColl, J. E.
Turner-Samuels, M.


Darling, George (Hillsborough)
McInnes, J.
Ungoed-Thomas, Sir Lynn


Davies, Ernest (Enfield, E.)
McKay, John (Wallsend)
Warbey, W. N.


Davies, Harold (Leek)
McLeavy, Frank
Weitzman, D.


Deer, G.
MacPherson, Malcolm (Stirling)
Wells, Percy (Faversham)


de Freitas, Geoffrey
Mahon, Simon
West, D. G.


Delargy, H. J.
Mallalieu, J. P. W. (Huddersfd, E.)
Wheeldon, W. E.


Dodds, N. N.
Mann, Mrs. Jean
White, Mrs. Eirene (E. Flint)


Donnelly, D. L.
Marquand, Rt. Hon. H. A.
Wilkins, W. A.


Dugdale, Rt. Hn. John (W. Brmwch)
Mayhew, C. P.
Williams, David (Neath)


Dye, S.
Mellish, R. J.
Williams, Rev. Llywelyn (Ab'tillery)


Edwards, Rt. Hon. John (Brighouse)
Messer, Sir F.
Williams, Rt. Hon. T. (Don Valley)


Edwards, Rt. Hon. Ness (Caerphilly)
Mikardo, Ian
Williams, W. R. (Openshaw)


Evans, Albert (Islington, S. W.)
Mitchison, G. R.
Williams, W. T. (Barons Court)


Evans, Edward (Lowestoft)
Moody, A. S.
Willis, Eustace (Edinburgh, E.)


Evans, Stanley (Wednesbury)
Morrison, Rt. Hn. Herbert (Lewis'm, S.)
Wilson, Rt. Hon. Harold (Huyton)


Fernyhough, E.
Mort, D. L.
Winterbottom, Richard


Fletcher, Eric
Moss, R.
Woodburn, Rt. Hon. A.


Forman, J. C.
Mulley, F. W.
Yates, V. (Ladywood)


Fraser, Thomas (Hamilton)
Noel-Baker, Francis (Swindon)
Younger, Rt. Hon. K.


Gaitskell, Rt. Hon. H. T. N.
Oliver, G. H.
Zilliacus, K.


Gibson, G. W.
Oram, A. E.



Gooch, E. G.
Orbach, M.
TELLERS FOR THE NOES:


Gordon Walker, Rt. Hon. P. C.
Oswald, T.
Mr. J. Taylor and


Greenwood, Anthony
Owen, W. J.
Mr. G. H. R. Rogers.


Grenfell, Rt. Hon. D. R.
Padley, W. E.



Grey, C. F.
Paget, R. T.

Further Amendment made: In page 9, line 6, at end insert:
(and the emoluments are not excepted as foreign emoluments)".—[Mr. H. Brooke.]

Amendment proposed: In page 9, line 18, at end insert:
Subject to that Schedule, the emoluments excepted from Cases I and II as foreign emoluments are emoluments of a person not domiciled in the United Kingdom from an office or employment under or with any person, body of persons or partnership resident outside, and not resident in, the United Kingdom.—[Mr. H. Brooke.]

Mr. Geoffrey Stevens: I beg to move, as an Amendment to the proposed Amendment, after "domiciled", to insert:
or if domiciled not ordinarily resident".
I understand that with your permission, Sir Charles, we can discuss this Amendment and the next Amendment to the proposed Amendment, at the end to add:
or under or with a permanent overseas establishment of a company resident in the United Kingdom".
I heard my right hon. Friend the Financial Secretary point out earlier this afternoon that his Amendments to Clause 10 are designed to leave the position of foreign nationals resident in this country as it is at present, namely, that their income shall be taxed upon a remittance basis and not on an earnings basis. I support my right hon. Friend in that, but I feel that the way in which he has seen fit to give effect to that very desirable object has led to a number of anomalies.
Whereas I think the effect of the Amendment moved by my right hon. Friend will be to leave the income of foreign nationals resident in this country taxable on their remittances and not on their earnings, as the Clause is drawn we shall have British subjects domiciled abroad but resident in this country—persons of British domicile resident in this country—taxed on their earnings instead of on the remittance basis.
That seems to be absolutely wrong. To claim the full benefit of the Amendment moved by my right hon. Friend, a person must have a foreign domicile and be employed by an organisation which is not managed or controlled in the United Kingdom. It is true that a number of foreign employees come to this country and, although the organisation is not resident in the United Kingdom, they have British domicile. It seems quite wrong

that those persons of British domicile should be charged on the earnings basis and not on the remittance basis.
Furthermore, there is the type of case of the British employee resident overseas, employed with a British company which may be operating overseas, who may be brought here to the head office of the company for a year's training. He will not be so well off as an American living in this country who is a foreign domiciled person. Those British trainees who come to this country for a year will be assessed for tax, not on the remittances paid by an overseas subsidiary of the United Kingdom company, but on their earnings.
5.15 p.m.
The second Amendment in my name seeks to ensure that, to get the full benefit of the Clause as redrawn, the person must be an employee of a subsidiary company formed overseas, but a subsidiary of a United Kingdom company. There are a large number of United Kingdom companies operating very widely overseas, not through subsidiary companies established overseas, but through branch offices. The branch office has no legal entity of its own and, therefore, a person employed by that branch office is treated for tax purposes as though he were employed by the head office. He is employed by an organisation which is ordinarily resident in this country and not resident overseas.
I commend both Amendments to the attention of my right hon. Friend. They represent genuine attempts to clear up what seem very serious anomalies.

Mr. F. M. Bennett: I wish to support my hon. Friend the Member for Langstone (Mr. Stevens) and to give an illustration so that my right hon. Friend may see the force of what we are saying. At present, there are banks in this country with branches overseas where British personnel are employed for many years at a time, but they remain domiciled in this country although their work, their life and their families are abroad and they have to face the higher costs of the economy abroad. A young man leaving his family abroad comes here for a period of leave, a period of training, or of attachment to head office. Unless the Amendment to the Amendment, or a similar provision, were adopted, that young man would have discrimination made against him because he happened to be domiciled in this


country in contradistinction to a foreign citizen.
I should have thought that the words suggested by my hon. Friend would go all the way to get rid of that anomaly, which I cannot think can have been in the mind of the Chancellor when he drafted the main Amendment.

Mr. H. Brooke: The effect of these two Amendments to the proposed Amendment would be that persons who are domiciled in the United Kingdom but not ordinarily resident here, and who work here for an employer not resident in the United Kingdom, or for an overseas branch of a British company, would be chargeable to tax on a remittance basis only and then only in years in which they are resident for tax purposes.
That all sounds rather complicated and technical. I will try to put it in practical terms. The Amendments would mean that a person whose permanent home was in this country, but who had been working abroad for some time for an overseas concern or an overseas branch of a British concern, and had become not resident for tax purposes and then returned to the United Kingdom to work for a period not of sufficient duration to render him ordinarily resident, would not be liable to tax at all if he remained not resident and would be chargeable only on the remittance basis if he became resident.
The Committee will appreciate that he would become ordinarily resident when he had been back here for three full years and, if at some earlier date he formed the intention of staying here a longer period, he would be regarded as ordinarily resident from that date. My hon. Friends have argued that anomalies would be created if these Amendments were not accepted, but I must put this to the Committee. In the Amendments which have been accepted, we have made a dent in the strictly logical basis of the Clause as founded on the recommendations of the Royal Commission. Because we have made that dent, it is not in itself an argument for making further dents, and it does not appear to my right hon. Friend that there are in these very special cases to which the Amendments refer the same grounds of expediency.
The Amendments that have been accepted have been accepted because of certain very undesirable results to the

British economy which would follow if the Clause had remained unamended, but there is no consideration of that kind here.
It is quite true that the individuals whom my hon. Friend the Member for Langstone (Mr. Stevens) has in mind may have hitherto, in some cases at any rate, been assessable on a remittance basis, but if we accept this Clause at all we accept it as based on the recommendation of the Royal Commission that liability to tax should be determined primarily by reference to the places where the duties are performed. For strictly practical reasons, we have agreed to make an exception in the one class which has been mentioned. I do not think that would justify us in extending the exceptions further where there are not the same practical reasons cogently operating. On those grounds, while I congratulate my hon. Friends on their watchfulness, I cannot recommend the Committee to accept the Amendments to the proposed Amendment.
I should like to take this opportunity of replying to the point raised by my hon. Friend the Member for Gillingham (Mr. Burden) because it is relevant here as well as to the Amendment on which he raised it. The type of person whom he mentioned would have his tax liability determined by whether he was domiciled here or abroad. If my hon. Friend studies the law of domicile further, he will understand why I am not anxious to give a firm answer "Yes" or "No" to any particular case. The people whom my hon. Friend has in mind would do well, if they are considering where they should work in future, to examine very carefully where their legal domicile will be.

Mr. Jay: I am very glad on this occasion briefly to support the Financial Secretary. I should have thought that if he gave way on this proposal, not merely would indefensible anomalies be created but it would be highly probable that the door would be opened to evasion. If it were really possible for a British subject resident, at any rate for periods, in this country and working for a foreign company or for the subsidiary abroad of a British company nevertheless to be taxed only on the remittance basis, I should have thought that would give rise to schemes the main purpose of which would be to avoid taxation.
On the other hand, the plausibility of the argument of the hon. Member for


Langstone (Mr. Stevens), who moved the Amendment to the proposed Amendment, largely arose from the extent to which the Government had gone on this Clause as a whole. It is because the Government made this extreme sort of concession that these apparent hardships arise, and they reinforce the argument which we advanced in the earlier debate. Nevertheless, I am sure that the right hon. Gentleman is convinced of the rightfulness of his case and if on this occasion a Division is called we shall support the Government.

Mr. Stevens: I am disappointed with my right hon. Friend's remarks. It only shows how dangerous it is, even in financial matters, to depart from purity. Look at the mess in which we can land ourselves. I do not want to land my right hon. Friend in further difficulties and therefore I beg to ask leave to withdraw the Amendment.

Hon. Members: No.

Question, That those words be there inserted in the proposed Amendment, put and negatived.

Proposed words there inserted.

Clause, as amended, ordered to stand part of the Bill.

Clause 11.—(RESIDENCE OF HOLDER OF OFFICE OR EMPLOYMENT PERFORMED ABROAD.)

Mr. H. Brooke: I beg to move, in page 10, line 5, to leave out from "person" to second "the" in line 7 and insert:
works full-time in one or more of the following, that is to say, a trade, profession, vocation, office or employment and the condition mentioned in the next following subsection is satisfied".
Perhaps it would be for the convenience of the Committee also to discuss the two subsequent Amendments to lines 8 and 10.
These three Amendments do two things. First, they bring within the scope of the Clause certain people who are engaged full time in a trade, profession or vocation, no part of which is carried on in the United Kingdom. If I remember rightly, this was a matter to which my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) drew attention when we were discussing this Clause earlier, and an under-

taking was given that we would look at it further.
Secondly, the Amendments provide for a slight relaxation of the requirement that the holders of offices and employment must carry out their duties wholly outside the United Kingdom as a condition of the application of the Clause. The Committee will recollect the debate which we had on the meaning of the word "wholly", in a similar context in what was then Clause 9 of the Bill, when an Amendment was moved by my hon. Friend the Member for Wimbledon (Mr. Black). I gave an undertaking that, while I could not accept his Amendment to substitute the word "mainly" for the word "wholly", because that would apply where 51 per cent. of the work was carried on abroad and 49 per cent. in this country, I would see if there was any form of words which would, as it were, so define the word "wholly" as to read "almost wholly". This is what we have sought to do here. I think that this will be in accordance with the wishes of the Committee as then expressed.
The first Amendment makes it clear that the trader or the professional man, whether working on his own account or in partnership, should be brought within the Clause if he is working full time in that trade, profession or vocation and if no part of it is carried on in the United Kingdom. The provision that the work should be done full time is designed to exclude those among the traders and professional men who are comparable with employees who have duties partly here and partly overseas. What we are seeking to do is to get a comparable test for the traders and the professional men. The tests for employees are that the employment must be full time and the duties must be performed wholly outside the United Kingdom. We are proposing similar tests for the traders and professional men, though after consideration we are willing to respond to the suggestion made by my right hon. and learned Friend the Member Kensington, South that they should be brought within the scope of this Clause.
I hope that as regards the difficult word "wholly" the new language suggested in the last of the three Amendments will commend itself to the Committee. We were all agreed at an earlier stage that it would be wrong to make this Clause inoperative because of the performance


in the United Kingdom of trifling duties which were merely incidental to the performance of the main duties aboard. We have sought—and I hope that we have been successful—to find a form of words, in the latter part of the third Amendment, which will define that situation satisfactorily and meet what were at the time the unanimous wishes of the Committee.

5.30 p.m.

Mr. John Peyton: It is only with very great reluctance that I intervene, thereby prolonging the proceedings on the Bill. It is also with great reluctance that I enter the wood of Income Tax law; to me it is a quite intolerable forest, which only too often is beyond human comprehension. We must hope that at some time the tax law will be reduced to a form which can be understood.
I am disappointed that my right hon. Friend has been unable to go rather further in these Amendments. I take it that the Clause as a whole is intended as a concession, but in fact there are certain classes of people—they may not be many—who, by losing their residence status, have lost a considerable benefit. I have never been satisfied that in recent years we have treated our colonial servants with anything approaching the measure of generosity which they might expect. I have referred to my right hon. Friend the instance of a constituent who is a colonial servant and who will be adversely affected to the extent of £200 a year.
All I am suggesting to my right hon. Friend—and I put the suggestion to the Committee now—is that it is right and proper that colonial civil servants serving abroad, particularly when they are coming towards the end of their service, should be placed in a position in which they can provide fully for their retirement at home.
This, I am aware, raises a general point which I feel has never been properly appreciated by the Treasury—namely, the wholly different nature of the problem of retirement for those serving in the Colonies overseas. It is not a problem which affects any civil servant in this country.
I have made as strong a representation to my right hon. Friend as I could. Although it may be too late this year to

take action, I very much hope that my right hon. Friend and the Treasury will go into the matter and not say merely that it would be inconvenient and would make the arrangement untidy by creating an exception but will admit that the demand of justice is very clear here, that a colonial civil servant, in particular, should in no way be penalised and that the benefit which he previously and very properly enjoyed should not now be taken from him.

Amendment agreed to.

Further Amendments made: In page 10, line 8, leave out "while fulfilling that condition".

In page 10, line 10, at end insert—

(2) The said condition is that no part of the trade, profession or vocation is carried on in the United Kingdom and all the duties of the office or employment are performed outside the United Kingdom.
(3) Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom.—[Mr. H. Brooke.]

Clause, as amended, ordered to stand part of the Bill.

Clause 20.—(RETIREMENT ANNUITIES (RELIEF FOR PREMIUMS, AND EARNED INCOME RELIEF).)

The Chancellor of the Exchequer (Mr. Harold Macmillan): I beg to move, in page 20, line 40, to leave out from "him" to the end of line 41.
It might be convenient if we took at the same time the Amendments in page 22, line 25; page 29, line 3; and page 29, line 7.
These four Amendments will allow those with two sources of earnings, one of which is pensionable and the other of which is not, to qualify for self-employed relief in respect of the earnings which are not pensionable. The Committee will remember that this point was originally raised on Second Reading and was raised again in Committee, when hon. Members were thinking of such persons as university dons, who derive earnings from coaching and writing. Since that time other examples have been brought to our notice. In our last discussion the main types included solicitors in private


practice who hold part-time pensionable posts as clerks to districts councils and other local bodies, and doctors in private practice who draw pensionable fees for part-time work as consultants under the National Health Service. It was thought that we ought to try to make a provision for such people whose service was partly pensionable and partly self-employed. We have tried to do so by these four Amendments.
The purposes of the first three Amendments is to delete from the three places in the Bill where they occur the words which restrict relief to those having no pensionable office or employment, and the fourth Amendment is consequential I hope the Committee will feel that by these Amendments we have carried out what was, I am sure, the general wish of the Committee in the previous debate in dealing with the problem of dual employment.

Mr. Gordon Walker: The right hon. Gentleman, or one of his right hon. Friends, gave a pledge on this matter and, as far as we can understand it, the pledge has been carried out. We are grateful to him and support this extension of the original principle of the Clause.

Mr. Stevens: I rise to express thanks on behalf of my hon. Friends and myself who tabled the Amendment in Committee. The Chancellor has met our wishes in a remarkably clear and fair-minded manner, and I thank him very much.

Mr. Leslie Thomas: I should like to endorse what my hon. Friend the Member for Langstone (Mr. Stevens) said, with reference to the Amendment down in my name and the names of my hon. Friends. I think the Chancellor's Amendments clear up a number of points and meet the difficult situation.

Amendment agreed to.

Mr. H. Macmillan: I beg to move, in page 21, line 22, to leave out from "or" to the end of line 24.
Perhaps we could discuss at the same time the Amendment in page 21, line 37.
These two Amendments are intended to strengthen the provisions of the Bill against the commutation or the assignment of self-employed persons' annuities.

It is necessary for purely technical reasons to make the Amendments, which remove any such danger.

Amendment agreed to.

Further Amendment made: In page 21, line 37, at end insert:
and that it does include provision securing that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment".—[Mr. H. Macmillan.]

Mr. H. Macmillan: I beg to move, in page 22, line 11, to leave out "the individual" and insert "any person".
This Amendment is advisable for the following reason: the Bill allows a self-employed person to buy, instead of a straight life annuity, an annuity for his life or ten years from his retiring age, whichever is the longer. It also allows him to buy a life annuity for his widow to start on his death, but under the Clause as drafted there is no option to extend her annuity for a guaranteed period if she should die soon after he dies. This Amendment will allow the widow's annuity also to be for her life or for ten years, whichever is the longer. It has been suggested to us that this Is an improvement which will deal with certain cases which would otherwise be cases of hardship.

Amendment agreed to.

Mr. H. Macmillan: I beg to move, in page 22, line 15, at the end to insert:
(e) in the case of an annuity which is to continue for a term certain, for the annuity to be assignable by will, and in the event of any person dying entitled to it, for it to be assignable by his personal representatives in the distribution of the estate so as to give effect to a testamentary disposition, or to the rights of those entitled on intestacy, or to an appropriation of it to a legacy or to a share or interest in the estate.
(4) So much of subsection (1) of this section as provides that an annuity shall be treated, in whole or in part, as earned income of the annuitant shall apply only in relation to the annuitant to whom the annuity is made payable by the terms of the contract.
This Amendment deals with two points relating to annuities guaranteed for a certain minimum term, and I think that the Committee would like just a short explanation.
Under the Bill, a self-employed person may buy an annuity that is to run from his retirement either for his life or for a stated term, which must not exceed 10 years, whichever is the longer. If he


should die within the stated term the annuity for the remainder of that term will be payable to his personal representatives. The first part of the Amendment provides, as an exception to the general rule prohibiting the assignment of annuities which qualify for relief, that an annuity which is to continue for a term certain may be assigned by will, and that the personal representatives may assign it to a beneficiary of the estate. The second part of the Amendment provides that, where the tail end of a guaranteed term annuity is thus assigned to a beneficiary of the estate, it shall no longer attract earned income relief. The annuity is treated as earned income of the self-employed person while he has it, and also for the life of his widow. After that it is not.

Amendment agreed to.

Mr. H. Macmillan: I beg to move, in page 22, line 23, after "law", to insert "of any part."
I think that it may be for the convenience of the Committee if we were to take with this Amendment that in page 22, line 25.
These Amendments were drafted after certain representations had reached us, and I think that they both relate primarily to the position in Scotland. Two of the conditions that must be satisfied by a trust scheme set up to provide pensions for self-employed persons are, as the Bill stands, first, that it must be established under the law of the United Kingdom, and, secondly, must be established by a body of persons representing a substantial proportion of the individuals engaged in a particular occupation in the United Kingdom.
The first of these conditions, owing to an error in our arrangements, does not as it stands, allow for the differences between English and Scottish law, and the purpose of the first Amendment is to allow a scheme established under the law in any part of the United Kingdom—either United Kingdom law or Scottish law. The second of these conditions would exclude a purely Scottish, Welsh or Northern Irish body. The object of the condition is to ensure that schemes are set up only by representative bodies with some status and reputation. It is not necessary to require them to cover

the whole of the United Kingdom. The only purpose of the conditions was to see that it was a reputable body that really had a serious existence. We are, therefore proposing this Amendment to admit either a Scottish or a Welsh or an Irish body so long as it fulfils the condition of being a reputable body of proper status in its own country.

5.45 p.m.

Sir James Hutchison: It is always easier and quicker to say "thank you" than to be critical or condemnatory. I am glad that my right hon. Friend has recognised that Scotland has a law code of its own, and that sometimes we think it is rather better than the English code, notably in the matter of executions. When I first saw this Amendment, it looked to me as if it might be interpreted as though Scotland were no longer part of the United Kingdom, so I take the occasion to say that it is, and that it intends so to continue.

Amendment agreed to.

Further Amendments made: In page 22, line 25, leave out from "individuals" to "engaged" in line 26.

In line 35, at end insert:
or of those so engaged in England, Wales, Scotland or Northern Ireland".—[Mr. H. Macmillan.]

Mr. H. Macmillan: I beg to move, in page 23, line 39, at the end to insert:
Service in an office or employment shall not for the purposes of this definition be treated as service to which a sponsored superannuation scheme relates by reason only of the fact that the holder of the office or employment might (though he does not) participate in the scheme by exercising or refraining from exercising an option open to him by virtue of that service.
This is the last of this group of Amendments. Its object is to ensure that a man who elects not to join his employer's pension scheme shall be eligible for self-employed relief. It is quite true that a very large number of pension schemes are compulsory for all employees, but there are many which are voluntary. As the Bill is drafted, an employee in a post within the scope of a pension scheme would fall to be treated as pensionable whether he joined the scheme or not, and would, therefore, be ineligible for self-employed relief in respect of his salary.
That was not our intention, but we have been advised that that would be the effect of the Clause as it is drafted at present; in other words, even if the scheme were voluntary a person would be regarded as being able to take advantage of it and could not, therefore, take advantage of the self-employed system. The purpose of the Amendment is to put that right, and to make it clear that he can exercise this option if he so chooses.

Mr. Gordon Walker: With the general intent here we are in agreement. This is obviously a just thing. What I am not quite clear about from the wording is what happens if the man, not having joined the scheme, takes advantage of this provision and buys annuities and so forth and later joins the scheme. That does not seem to be dealt with. So far as I can see, he can go in and out of the employer's scheme, buying annuities here and there and then gaining the benefits under the employer's scheme. Is that not possible by this Amendment as now drafted? As the Chancellor explained it, we are in agreement with it. Goodness knows I do not set up to understand the language in which we are now dealing, but it did strike me that there might be a certain cat-and-mouse position by which a certain privileged class of person could get into both schemes as it suited them, one after the other.

Mr. Macmillan: I do not think that that would be the result. As the Clause is drafted, I think that the Revenue would have no option but to refuse his claim for Income Tax relief, if, being one of the people who could have joined a voluntary scheme, he refused to, but chose to go in for this. The Revenue would not allow a claim for deduction in that case. As the Clause is drafted they would have to say that he could not make the deduction.
As I understand it, this Amendment gives the Revenue the option, the administrative capacity, to say what should be done; and I think that all it does, therefore, is to remove an obligation on the Revenue not to grant it. I do not think that it allows a man to opt in and out or to operate both schemes at once, but it does take away what otherwise would absolutely prevent the Revenue from admitting his claim for relief.

Mr. J. T. Price: Perhaps the Chancellor could throw some light on the position of a man who has at some time been in a pension scheme under which he has been granted a deferred annuity—a frozen annuity—and, because of what may be a very small, nominal pension payable at a certain date or on reaching the age of 60 or 65, may be excluded from the self-employed provisions laid down in the main part of the Act. Has the Chancellor considered that there may be thereby an express prohibition against the admission of any citizen to the self-employed provisions for relief if, at some previous time, a frozen or deferred annuity has been granted under some existing scheme? Without wishing to enter into any heavy arguments about the technicalities, it does not seem to me that that is covered by the present legislation.

Mr. Macmillan: I must say that I find it rather difficult to follow the hon. Gentleman's point as he explained it. Admittedly, this is a new plan. It may be that we shall find, from year to year, that certain Amendments will have to be made.
Whatever might be the dangers, I think it would on the whole be better to make this Amendment I am now proposing. It is obviously unfair that a man who is employed somewhere where joining a scheme or not is a voluntary matter should have taken away from him the right to exercise that choice. What this Amendment does is to say that he can make a choice, and, if he chooses to go for the self-employed scheme, he is not automatically prevented from doing so. I am informed that he could not jog in and out.
I can only say that these problems, and the even more complicated point which the hon. Member for Westhoughton (Mr. J. T. Price) has just put, are matters we have got to accept at this stage; we have the scheme, it is a new one, and we must see how it works. I have no doubt at all that there may be some loose ends we shall have to tie up when we have got some experience of it.

Mr. Gordon Walker: I am not quite sure that the Chancellor has fully taken the point which I was trying to make. I did not quite mean jogging in and out,


which would be rather an extreme version of it. The effect of the Amendment, as he says, is that the Treasury or the Board would no longer have to refuse a man the right to come under the benefits of Clause 20.
May I put my question in this way? A man may have an optional scheme with his employer, which he does not enter. He then goes on for three or four years and buys annuities, each of those annuities being the subject of separate and distinct contracts—that being the whole purpose of them—and then, having done that, he says he no longer wishes to do that but wishes to exercise his option to join the employer's scheme.
Would the Chancellor object to that? If he does, what is there in this Amendment to stop a man, not going in and out, as he suggested, but having for X years benefited from Clause 20 suddenly deciding that it would pay him to benefit under the Clause by coming under his employer's scheme, thereby getting the best of both worlds? He would be the only sort of legal creature who could get the best of both worlds in that way.

Mr. Macmillan: I am informed by that admirable tic-tac service, of which I have now had many years' experience, that the answer to the question raised by the hon. Member for Westhoughton (Mr. J. T. Price) is really this, as I understand it. We want to take away from a man, so long as he does not enter a scheme, what is now a prohibition from making this arrangement for himself. As the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker) says, they are separate arrangements. After some five or six years, a man may, in his present employment or, if he changes his job, in another firm, decide that he would like to come in, though, of course, one does not do that on quite such good terms; in an employment scheme there is always some disadvantage from a later joining.
I do not think that this Amendment prevents him doing that, nor do I see why he should be prevented. There would be no objection to that happening. I do not think that it is a very common thing to happen. The more common thing is that a man would exercise his right not to join a company scheme in order to join one of his own. I am told that, as it is drawn, there is nothing to prevent him

doing that. I will think about the matter again, and perhaps we might look at it afresh next year, though I do not at present see that there is any objection.

Mr. J. T. Price: I do not want to prolong this discussion, and I am not raising this question in any critical spirit. I do, however, put it forward quite seriously as a matter of policy for this House. Many of us are anxious to safeguard the position of the established, individually administered funds as against the casual contracts which may be entered into by insurance companies prejudicial to existing rights which have been strongly defended in this House since the Act of 1921. It is from that point of view that we are putting these very tentative views forward, because any haphazard approach to this matter which might undermine the stability of existing funds would be something which many of us would regard as a quite wrong development.

Mr. Macmillan: I do not know whether I am being completely accurate, but I will put it in this way. The fact that a person had in the past had a pensionable post does not deprive him of the benefit of this Clause.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 21.—(NATURE AND AMOUNT OF RELIEF FOR QUALIFYING PREMIUMS.)

Mr. H. Macmillan: I beg to move, in page 24, line 28, to leave out from "year" to the end of line 31, and insert:
(but so that in the case of individuals holding a pensionable office or employment, and of individuals born in or before the year nineteen hundred and fifteen, this proviso shall have effect subject to the provisions of the Schedule (Retirement annuities; adjustments of limit on qualifying premiums) to this Act)".
I do not know what would be most convenient, but this Amendment is designed really only to lead up to, and to be part of the necessary method of leading up to, the proposed new Schedule. Perhaps it would be convenient at this stage to move it formally, since without it the Schedule cannot be moved or debated.

Mr. Gordon Walker: We are quite agreeable to that. I would only make it clear that we have objections to the


Schedule, and we therefore reserve our rights in that matter.

Amendment agreed to.

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Gordon Walker: Clause 21, as amended, is, of course, a Clause in a very different state from that in which it first reached us in the Bill. As the Chancellor will have seen from our treatment of his Amendments to Clause 20 with which we have just been dealing, we are really very favourable to this broad idea of his in carrying out this part of the Millard Tucker proposals. We are not hostile to that at all, and our attitude on these further adjustments and concessions he has made proves that.
We did originally agree to this Clause in the Finance Bill, but at that time it had an upper limit of £500 a year. Now it comes to us with an upper limit of £750 a year put into it. Therefore, although we broadly support the Millard Tucker proposals in so far as they appear in this Bill, and although we are perfectly agreeable to further adjustments which make the thing more just, we are deeply and irrevocably opposed to this raising of the limit from £500 to £750 a year, because it gives a benefit—and the Chancellor must realise it—solely and exclusively to people earning more than £5,000 a year.
This is really the only concession—at any rate, it is the most important—he has made in the whole of the Finance Bill. Although he dresses it up as a savings concession, it is in fact a concession to these extremely rich people. All sorts of other concessions, no more expensive or even less expensive, which could have been made he has turned down, but this one which benefits only people earning over £5,000 a year he has accepted. We are, therefore, very strongly opposed to it, and we shall fight it in all the ways open to us.
This is not just a bit of envy on our part. The limit of £500 a year which was in the Bill originally did help to reconcile us to certain defects in these Clauses in Part III, defects which were very powerfully pointed out in the Wocdcock-Cater dissent to the Millard Tucker Report and in the opinion of the minority of the Royal Commission on the Taxation of Profits and Income. They

pointed out defects in the original Millard Tucker proposals and we feel that those defects were real defects; but as long as there was limit of £500 a year, those defects did not really become very important in scale, and we swallowed our objection to them. One must not strain at gnats all the time, and the fixing of the £500 limit did substantially affect our view of the matter.
To lift the limit to £750 is to bring in people earning between £5,000 and £7,500 a year, and even more still. In such circumstances, of course, the defects which were pointed out by those dissenting to the Millard Tucker Report and by the minority of the Royal Commission become of really great importance.
6.0 p.m.
That is why we are so strongly opposed to this proposal. We are opposed to it for arguments set out very cogently in those two dissents to which I have referred. Our objections and the objections set out in the Minority Report of the Royal Commission—for instance, to including self-employed people and controlling directors—become worse when the limit is raised from £500 a year.
The Financial Secretary to the Treasury told us in Committee that this concession would cost something like £1½ million a year. I have been trying to discover how many people will benefit from this £1½ million a year. On 21st June, I put down a Question to ask the right hon. Gentleman the number of people earning over £5,000 a year and he was good enough to tell me that there was some 22,000 of them. Of those 22,000, however, about half were self-employed and half were employed. Most of those who are employed will, of course, come under "top hat" schemes and similar arrangements, so that in the main we are dealing with half of the 22,000—that is, those who are self-employed.
I do not know whether the Chancellor, when coming to his estimate of £1½ million as the cost, worked out how many people he thought would come within this benefit. As far as I can see, if I take the number as 11,000 to 12,000, I am reasonably safe in my figures. Those employed at the level of over £5,000 a year tend to come into pension schemes which their employers organise, so that there will not be many more than half of the 22,000 who are self-employed.
That means that a present of about £125 a year is being made to a very small number of people, all of whom, to get this present, must be very rich indeed.

The Temporary Chairman (Sir Gordon Touche): It occurs to me that it might be more convenient if these matters were discussed when we discuss the new Schedule—"Retirement Annuities; Adjustments of Limit on Qualifying Premiums".

Mr. H. Macmillan: It is simply a matter of convenience, Sir Gordon. When we discussed the formal Amendment which led up to the Schedule, I realised that we would have a full debate on this issue. It is simply a matter of convenience to the Opposition whether they prefer to have the debate on the Motion, That the Clause, as amended, stand part of the Bill, in which case it might be necessary to repeat the argument when discussing the Schedule, or whether it would be better to discuss the matter fully when we take the new Schedule so that we may then have the one debate on the whole issue.

Mr. Gordon Walker: I certainly will not repeat my arguments when we move from Committee to Report, Sir Gordon, but I understood that our Amendments to the new Schedule were not being selected and that we would raise points when dealing with our Amendments to Clause 21 on Report. When we reach that stage, however, we will be making quite different points. I am arguing now that the limit should not have been reached. When we reach the later stage, I shall argue that the limit, having been raised, there are certain things we would like to do about it.

Mr. H. Macmillan: If the right hon. Gentleman wishes to argue the whole point on the Motion, That the Clause, as amended, stand part of the Bill, we can have the argument on raising the limit now and when we come to the new Schedule we can deal with the points he has mentioned if the main principle has been accepted by the Committee. It would be better, however, not to argue both sets of points twice.

Mr. Gordon Walker: I assure you, Sir Gordon, that we will not do it twice. I am prepared to deal with the matter later, but that would necessitate repeating the

first part of my speech, otherwise my remarks will be unconnected. However, I am near the end of what I have to say.
The Chancellor must face the fact that he is giving a present of something like £125 a year to people who already have to be earning £5,000 a year to get it. This is an extraordinary concession that he is making, and I am sorry that he has done it. We did not want to oppose this arrangement; broadly speaking, we are agreeable. We would far sooner that these important innovations, which, no doubt, will have to be amended from time to time, should enter into our financial system with the agreement of both sides of the Committee.
As these proposals first appeared before us in the Finance Bill, before it went into Committee, that would have been the case. We were all agreeable; the whole thing would have come about with the agreement of both sides of the Committee. Now, however, the Chancellor, by singling out this tiny class of very rich people for this benefit and by multiplying the defects in his scheme by so doing, has divided the Committee. We feel strongly about it.
It means that when we on this side come to command the finances of the country, these are things we must think about again. It will be a great pity if one has to go back and forth in these things in such matters as limits. We were agreed with the original Bill. It is only now, when the Chancellor has mucked around with it, that we are in such bitter and strong disagreement.
Party division on this sort of matter is unfortunate if it can be avoided. It leads to coming and going, making changes, and people being uncertain of the future. It is within the Chancellor's power to remove this uncertainty without eating his words. He has only to go back to the words he originally spoke, which is what he has been doing about the Americans who are over here. He ate his words and went back more or less gracefully to the position before the Bill was introduced. Here, we ask him merely to go back—we will not laugh at him; we will be only too pleased about it—to the position which he originally took up and very ably defended. He gave powerful arguments for his first position and I ask him to consider them.
If the Chancellor does not do that, there is an element of bitter controversy on this point between us and one which may not end tonight. The Chancellor should think of that, because that is wrong and we do not want it. If, however, he insists, he knows our position. All the people earning £5,000 and £7,500 a year and all the rest will be on notice that these things are not as secure as had the Chancellor left the Bill in its original form.

Mrs. Eirene White: I am glad that we are discussing this matter on the Motion, That the Clause, as amended, stand part of the Bill, for it is better for the Committee to be clear on the main principle. When we reach the new Schedule, there will be other considerations to be taken into account.
Nothing which has been said in our debates on the Bill or in the comments in the Press has convinced me that the Chancellor was well advised in raising the limit as he did. I am fortified in this opinion by an article which appeared in the June issue of the Banker. That article, dealing with pensions for the self-employed, was written before the Chancellor's concession was made. Therefore, the remarks made then, when the top limit was still at £5,000 a year, or a premium of £500, apply even more strongly to the Chancellor's present proposals after he has so very considerably raised the limits.
Even of the original scheme the writer in the Banker said that it was clear that the concessions to the self-employed meant most to the Surtax payer, and that for the non-Surtax payer the value of the new facilities was less clear. Even on the lower limit, therefore, it is plain that this concession is already of great benefit primarily to those who are in the Surtax-paying class.
In this article in the Banker there was a most interesting table showing the net cost to the individual taxpayer after tax relief had been taken into account on each £100 of premium which he pays under this scheme. Of course, although the number of £100 worth has now been increased, the principle of the matter remains the same. It shows that a person whose income is £2,000 a year pays in effect £66 19s. for each £100 worth of premium; that the person earning £5,000 a

year pays in effect only £35 for his £100 worth of premium; the person earning £7,500, instead of paying £66, will pay only £26 in effect. Higher up the income scale, a person earning £15,000 a year or more, although not allowed a higher proportion than that allowed on an income of £7,500, nevertheless, owing to the tax which people in that class pay, gets his £100 worth for an effective price of £7 10s.
Therefore, the Chancellor is dealing with a group of people, those with between £5,000 and £7,500, who are getting very substantial extra benefits because of the extra tax remission which they obtain at the same time. This really very large increase is a thoroughly retrograde social step.
As my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) very properly said, we on this side were prepared to reckon £5,000 a year as being a not unreasonable level for the professional man. The only argument, I think, that can be fairly put forward in favour of the increased limit is that which was put forward rather peculiarly by my right hon. and learned Friend the Member for St. Helens (Sir H. Shawcross) yesterday. The burden of his argument, as I understand it, was that this concession had an element of justice for the professional man compared with the business man in a "top hat" scheme. As we on this side of the Committee object in any case to a "top hat" scheme, that argument will not find very much favour with us.
There is, however, another element in this which was also made clear in that very revealing article in the Banker. Having said that the concession meant most to the Surtax payer and probably meant very little to the non-Surtax payer it went on to say:
There are interesting possibilities, however, for controlling directors".
It points out that controlling directors may now a fortiori benefit under the new higher concessions.
A controlling director may now be able to make provision for Estate Duty by disposing of his shareholdings during his lifetime secure in the knowledge that he will have a pension for life at retirement and is thus enabled to afford a drop in income that will ensue through giving away this concession".
This is a very interesting possibility, and it is a possibility which is very consider-


ably extended by the concession which the Chancellor is making by the Clause as it now stands. Therefore, it seems to me there are the clearest possible reasons why we on this side of the Committee should oppose the Clause, nad I hope we shall do so in no mistakable manner.

Mr. William Shepherd: I do not want to detain the Committee, but I must observe that the hon. Lady the Member for Flint, East (Mrs. White) could have no difficulty in proving that those who pay the most tax get the most relief when tax is reduced. I appreciate the way in which the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker) dealt with this issue. It could have been an issue of considerable controversy. I think most hon. Members on this side of the Committee are grateful to the Opposition for the way they have tackled it.
6.15 p.m.
It may appear that giving this advantage to people with incomes up to £7,500 is unwise, but I would urge upon the right hon. Gentleman opposite to realise that it is most unlikely that any individuals who are in business on their own account or in a professional capacity will be able, even under the provisions as at present revised, to give themselves pensions equal to those of people employed in similar capacities by firms, or a rate of pension similar to that of those employed in administrative jobs and in the Civil Service.
There are two characteristics of being in business on one's own account or of being a professional man. Such professional people do not reach a high level of income until relatively late in their careers. The incomes of people in business on their own account are subject to considerable fluctuations. What this increase from £5,000 to £7,500 does is to give them some insurance against the fluctuations which are almost inevitable in the incomes of people engaged in business on their own account. If hon. and right hon. Members opposite will look at it from that point of view, they will see that this is really an insurance against the hazards of being engaged in business or in a profession on one's own account. Thus this proposal is not so anti-social as it may have appeared at first sight.
I very much indeed doubt whether there will be many individuals who in the next 30 years will be able from their earnings

each year to put away £500 or £750 for insurance purposes. When we see this scheme working out we shall see that there will be very few individuals indeed who in a period of 30 years will be able year after year to set aside such sums for this purpose. I hope that hon. and right hon. Gentlemen opposite will realise that owing to the hazardous nature of being in business on one's own account, and as professional people do not earn anything like such incomes until comparatively late in life, the adjustment which my right hon. Friend has made is not an unreasonable one.

Mr. J. T. Price: I share the concern of my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) about this departure and the erosion of the Chancellor's mind upon this question. The Chancellor will have only himself to blame if he runs into heavy weather on this Clause. There are many of us on this side of the Committee who, on first seeing the Millard Tucker proposals and their embodiment in the Bill, were prepared to agree that, on a general question of social equity as between different citizens in the community, we were justified in giving rather qualified support to those proposals. We were certainly not prepared for the tremendous increase in the upper limit which has been introduced into the Bill since the Second Reading.
I am not deliberately raising a class issue. The Chancellor the other day assured some of his supporters in the country that they could not expect even a Conservative Government always to pander to the middle classes. The upper limit of £500 which we on this side of the Committee were reluctantly prepared to support has now been raised to the offensive increase of £750.
Perhaps the Chancellor may not realise as clearly as he ought that many of us who represent industrial constituencies in the parts of the country where the real work of the country is done will have to face criticism if we allow this Clause to go by unheeded. Very many of our constituents constantly press us to get an increase in the miserable 50s. a week for old-age pensioners. Now the Chancellor proposes in this case that the upper limit shall be £750 regardless of the year in which the annuitant was born, and in a certain margin of cases, that is, those


born before 1907 and in some instances up to 1914, the upper limit is increased to as high as £1,125.
What is the significance of these figures? I ought to declare that I have given some study to these matters and I am not unfamiliar with the aspects of annuity finance and their impact on the revenues of the country. It is clear that there are persons in receipt of very large incomes not only from self-employment but from investment and inheritance who are able to raise from their resources sufficient to pay £750 a year for 40 years. These cases are by no means imaginary. In this country, 1 per cent. of the population still owns 50 per cent. of the wealth. This fact has a great bearing on the whole matter.
A relatively young man who has sufficient access to means to pay £750 a year will have by the time he reaches the normal age of retirement at 65 a capital sum, with interest at 4 per cent., of something over £50,000. This will provide him, on present annuity tables, with a pension of one-tenth the capital value, that is £5,000 a year. It will not only provide him with that pension but will erode the capacity of the Treasury and the National Exchequer to collect Estate Duty at death which otherwise would be payable in a capital sum if the money had been saved by some other means.
I have no illusions about these provisions. I speak rather regretfully about this because, in discussing the problem privately with some of my colleagues, I have been inclined to advise that the Millard Tucker proposals are sound in principle. But when they are carried to these limits it is palpable that they are a device to provide a vehicle for avoiding the full impact of Surtax on annual incomes and to avoid the impact of death duties on estates.
This is not good enough. I know that the Chancellor has spent a good deal of time and has used a great deal of midnight oil and vinegar rags on this problem and he has listened to the pressure groups who—and I am not complaining—have been to see him, but I warn the right hon. Gentleman that when he introduces matters of this kind, which are clearly class measures, into an austerity Budget, we are entitled to

protest from the Labour benches and to carry our protest into the Lobby.

Sir Patrick Spens: I am very sorry to find that what started as a rather impetuous objection at an early stage has grown to something like steady and determined opposition to this change. It is easy to think of someone who, for 40 years, is so rich as to be able to pay £750 a year premium out of his income on an insurance policy, and thereby to build up a cumulus of criticism, as hon. Members opposite have done.
I look at the matter from the entirely different point of view of the self-employed professional man who, if he was lucky, 40 years ago might have been making £750 a year and possibly able to pay £10 a year premium—and with no assets and no inherited wealth, which have to be presupposed to build up the criticism offered by the Opposition. Such a man, by his own efforts, gradually increases his income over the 40 years so that at the end of that time he may be lucky enough to be making an earned income of £5,000 a year out of which perhaps—because at that stage he would probably have large family responsibilities—he would be able to pay, with great difficulty, a premium of £500 that particular year.
If he is a barrister he may with luck have a big case the next year and be able to pay £600 premium, but later he may be back to an income of £3,000 or £4,000 a year and be able to pay a far lesser premium. Then, again, perhaps for a year or two he might be able to pay £750 a year. This provision was suggested to try to enable two things to happen. It was to enable these people to try to safeguard their future when, if they are not fortunate enough to be given judicial employment, their practice might dwindle away in old age. It was to enable them to provide a pension for themselves or, if they were somewhat better off, to increase their savings for their own and the country's benefit.
I remain, for those reasons, profoundly grateful not only to Sir James Millard Tucker but still more so to my right hon. Friend the Chancellor of the Exchequer for having introduced these provisions. I am absolutely certain that they will not be used in the way the hon. Lady the Member for Flint, East


(Mrs. White) and the hon. Member for Westhoughton (Mr. J. T. Price) have suggested. I believe that they will be a great encouragement and a help to the professional classes, having regard particularly to those who are late entrants and who may have the opportunity for a year or two to put by the larger sums to which reference is made in the Schedule. These provisions will also be of great advantage to those people who were extremely hard hit during the war and were unable to start earning. The Committee should be grateful to my right hon. Friend for what he has done.

Mr. G. R. Mitchison: I should like to direct myself to answering the right hon. and learned Member for Kensington, South (Sir P. Spens). We have had painted for us a delightful picture of the man who is not in a position to save much early on, but, later, is in a position to save more. We have also had the delightful picture of the somewhat elderly person who will no doubt benefit in certain circumstances. I merely point out to the right hon. and learned Member that there arc Amendments on the Notice Paper to Clause 21, page 24, lines 21 and 23, which provide for those two cases and upon which we shall confidently expect his support when we debate them later.
The right hon. and learned Member must remember that there are some cases which are not provided for by those two Amendments, and which are not of the character which he has so eloquently and I might almost say so pathetically described to us. There are some fortunate people who have incomes of between £5,000 and £7,500 a year for quite a long time, and we have to consider whether those persons should be entitled to a special tax concession at a time which, as we understand from the Chancellor at other moments, is one of national crisis, financial emergency, of trying to stand still on a plateau which we may or may not attain, and of a number of other remarkable difficulties.
If the change which is now appearing in the Bill, and for which he had some initial responsibility, is designed to cover the type of case for which he has so much regard why, instead of wringing our hearts at this late stage, did the right hon. and learned Member not draft the proposals to cover the type of cases which he has

mentioned and limit the proposals to those cases? I would not accuse him either of laziness or of perversity, but we view with some suspicion a speech of this character from a right hon. and learned Gentleman who could, if he wanted, have limited these benefits to that class of person, and has extended them to a class of person, who—without saying anything unduly against them—are not entitled to any special benefit under these Clauses in the present state of the national finances brought about by the present Government and Chancellor.

6.30 p.m.

Mr. H. Macmillan: I shall not venture to intervene in this dispute or to broaden the discussion into the wide fields suggested by the last sentence of the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison). This debate has been an interesting one and moderately well conducted. The right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker) said with great truth that his party had given a general support to the principles underlying these proposals, and I am grateful for that. I recognise that it is helpful, both for now and for the future. The right hon. Gentleman went on to say, more in sorrow than in anger, that I, having now decided considerably to raise the limit, would alter the entire character of their approach to these plans. I hope that is not a final verdict, because it is a great advantage that this scheme, which is one of the main features of the Budget of the year, should have broad support, anyway in principle.
I cannot quite see how there can be such a great distinction of principle between the sum originally suggested and the sum now to be suggested. I did not know there were so many more people with £5,000 a year than £7,000. I thought that all the rich were damned, but particularly the class with unearned incomes. But then we are not dealing with those, we are dealing with people who are ex hypothesi self-employed, professional men or others, earning their own living.
If it were true that there was an absolute rule in any walk of life, either among the higher civil servants or among judges or among business men, to have an income above £5,000 a year then I could understand an argument that the


limit of £500 was sacrosanct. The truth is that we are trying to deal with a rather special class of people who have to look after themselves, as was so well put by my hon. Friend the Member for Cheadle (Mr. Shepherd).
Of their nature their occupations are often hazardous. They, and often their parents before them, made great sacrifices before they started these occupations. There are many entrants in these races and not very many of them make the grade. In these walks of life there are a tremendous number of young men who start, but some do not succeed. Those who succeed very often do so only for a short time and with somewhat fluctuating fortunes. I thought, therefore, having listened to the debate, and having received strong representations from many of the professional societies, that it would be fairer to increase the limit to the sum I now suggest.
I was particularly struck by some of the arguments put forward by the right hon. and learned Gentleman the Member for St. Helens (Sir H. Shawcross). He made a very powerful case, both in his approaches to me on behalf of the Bar and in what he said. I am sorry that I have not been able to meet all the suggestions which came from the right hon. and learned Gentleman, but I think he feels that we have met some. He made a strong and powerful case, which was referred to by one hon. Member this afternoon. There has been that problem of uncertainty, there is the problem of fluctuation, and there is the fact that other people, in different walks of life, are to have either from business, or now even from the Civil Service, very high rates of pension provided for them.
I think that the right hon. Gentleman the Member for Smethwick was fair in his first approach and I do not think that he can feel that this difference of degree is such an enormous difference in principle as to lead him to oppose the entire scheme which otherwise he would be prepared to support.

Mr. Gordon Walker: I based myself on the minority Report of the Royal Commission, which stated that it begins to work above £5,000.

Mr. Macmillan: Yes, but nobody can fix an absolute figure and say that it is

absolutely right or that another figure is absolutely wrong. It is a matter of judgment. I say, therefore, that if his side of the Committee does not agree with the judgment which I am asking the Committee to form, I hope, nevertheless, it will not mean that the whole of this scheme will have from now on the insuperable opposition of Members of the party opposite.
If the right hon. Gentleman gives me notice that there may be changes in future in the system of taxation, that may be so. Taking it broadly, and having regard to all the considerations brought to my notice—and I think brought to the notice of many hon. Members—and having regard to the fluctuating character, the hazardous character and to some extent the special conditions that apply to what is admittedly a small number of people, I think that on the whole the Committee would be wise to accept a scheme which, since these people play a great part in all the different professions, will, by giving them a greater sense of security and something more still to work for, be to the general benefit of the community.

Mr. Harold Wilson: I had not intended to intervene in this debate, but in view of the reference by the Chancellor to my right hon. and learned Friend the Member for St. Helens (Sir H. Shawcross) I ought to intervene to make it clear, in case there is any doubt in any part of the Committee, that my right hon. and learned Friend was not speaking as a Member of the House of Commons, and certainly not in his capacity as a member of the Labour Party. He was speaking as Chairman of what must, within the context of this debate, be regarded as a pressure group.

Mr. H. Macmillan: I think that at one stage in the speech which is reported in this morning's newspaper he made that clear. I said that the right hon. and learned Gentleman spoke as Chairman of the Bar Council.

Mr. Wilson: I did not want there to be any doubt about that. Certainly, in anything that my right hon. and learned Friend said he was speaking in a representational capacity and not in his capacity as representing either St. Helens or this side of the Committee.
Since I am now on my feet perhaps I might refer to one or two other points


made by the Chancellor. I think the Chancellor has taken this first point, if he does not agree with it. We are not opposed to the principle of this Clause, but what has made it unacceptable to us is the concession accepted by the Chancellor, and now enshrined in the Amendments on the Notice Paper. It is only fair once again to remind the Chancellor that it was not very easy for this side of the Committee to accept his proposals at all so far as the Millard Tucker Report is concerned, when we heard them in the Budget speech.
I have told the Committee before that we divined in advance that this concession was to appear in the Budget, and we had several meetings on it, even before Budget day. Our view was that if any proposals made by the Chancellor on this subject were broadly on the lines of the minority Report, we should feel that they might be accepted, particularly if they appeared as part of a generally fair Budget. It was not, of course, a generally fair Budget.
In spite of that, we felt, after consideration, that we should support the Chancellor's proposals although they were not part of the kind of Budget to which I have referred and although they went considerably beyond the minority Report of the Millard Tucker Committee. This was not easy. We have been told that they are an incentive to savings. As some of us have previously had occasion to remark, it seems odd that every Budget concession

during the last four years has been an incentive to someone in relation either to production or savings, and all too often it has seemed to refer to people with higher incomes or to companies. I had to ask the Chancellor once why it was that there seemed never to be any incentives for poor taxpayers and all the incentives were for the richer ones. Although it was not easy for us to accept the proposition, nevertheless we did so.

Then the Chancellor, despite all his earlier arguments, which had been powerful, accepted this back bench Tory Amendment in the middle of the night. As my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) has made clear, it has destroyed the basis on which we felt we could go along with the Chancellor. It is for that reason that when the debate is ended—I am not seeking to close it at this point—we shall want to divide against the Clause, making it clear that we agree with the principle of doing something for self-employed and professional persons, but feel that the Chancellor has gone much too far in a Budget where he has done so little for so many people and where he has steadfastly refused all kinds of concessions, including one we debated many weeks ago which affected the welfare of old-age pensioners.

Question put, That the Clause, as amended, stand part of the Bill:—

The Committee divided: Ayes 244, Noes 196.

Division No. 257.]
AYES
[6.42 p.m.


Agnew, Cmdr. P. G.
Boyle, Sir Edward
Deedes, W. F.


Aitken, W. T.
Braine, B. R.
Dodds-Parker, A. D.


Allan, R. A. (Paddington, S.) 
Braithwaite, Sir Albert (Harrow, W.)
Donaldson, Cmdr. C. E. McA.


Alport, C. J. M.
Brooke, Rt. Hon. Henry
Doughty, C. J. A.


Amery, Julian (Preston, N.) 
Browne, J. Nixon (Craigton)
Drayson, G. B.


Anstruther-Gray, Major Sir William 
Bryan, P.
du Cann, E. D. L.


Armstrong, C. W.
Buchan-Hepburn, Rt. Hn. P. G. T.
Dugdale, Rt. Hon. Sir T. (Richmond)


Astor, Hon. J. J.
Burden, F. F. A.
Duncan, Capt. J. A. L.


Baldock, Lt.-Cmdr. J. M. 
Butcher, Sir Herbert
Duthie, W. S.


Baidwin, A. E.
Campbell, Sir David
Eden, Rt. Hn. Sir A.(Warwick&amp;L'm'tn)


Balniel, Lord
Channon, H.
Eden, J. B. (Bournemouth, West)


Barlow, Sir John
Chichester-Clark, R.
Elliot, Rt. Hon. W. E.


Barter, John
Clarke, Brig. Terence(Portsmth, W.)
Emmet, Hon. Mrs. Evelyn


Baxter, Sir Beverley
Cole, Norman
Errington, Sir Eric


Beamish, Maj. Tufton
Cooper-Key, E. M.
Fisher, Nigel


Bell, Ronald (Bucks, S.)
Cordeaux, Lt.-Col. J. K.
Fleetwood-Hesketh, R. F.


Bennett, F. M. (Torquay)
Corfield, Capt. F. V.
Fletcher-Cooke, C.


Bevins, J. R. (Toxteth)
Craddock, Beresford (Spelthorne)
Fort, R.


Bidgood, J. C.
Crouch, R. F.
Foster, John


Biggs-Davison, J. A.
Crowder, Sir John (Finchley)
Freeth, D. K.


Birch, Rt. Hon. Nigel
Crowder, Petre (Ruislip—Northwood)
Galbraith, Hon. T. G. D.


Bishop, F. P.
Cunningham, Knox
George, J. C. (Poliok)


Black, C. W.
Currie, G. B. H.
Gibson-Watt, D.


Body, R. F.
Dance, J. C. G.
Glover, D.


Bossom, Sir Alfred
Davidson, Viscountess
Godber, J. B.


Boyd-Carpenter, Rt. Hon. J. A.
D'Avigdor-Goldsmid, Sir Henry
Gomme-Duncan, Col. Sir Alan




Gough, C. F. H.
Leburn, W. G.
Rees-Davies, W. R.


Graham, Sir Fergus
Legge-Bourke, Maj. E. A. H.
Remnant, Hon. P.


Grant, W. (Woodside)
Legh, Hon. Peter (Petersfield)
Renton, D. L. M.


Grant-Ferris, Wg. Cdr, R. (Nantwich) 
Lindsay, Hon. James (Devon, N.)
Ridsdale, J. E.


Green, A.
Lindsay, Martin (Solihull)
Rippon, A. G. F.


Grimston, Hon. John (St. Albans) 
Linstead, Sir H. N.
Robertson, Sir David


Grimston, Sir Robert (Westbury) 
Lloyd, Rt. Hon. Selwyn (Wirral)
Rodgers, John (Sevenoaks)


Hare, Rt. Hon. J. H.
Lloyd-George, Maj. Rt. Hon. G.
Roper, Sir Harold


Harris, Frederic (Croydon, N. W.) 
Longden, Gilbert
Ropner, Col. Sir Leonard


Harris, Reader (Heston)
Lucas, Sir Jocelyn (Portsmouth, S.)
Russell, R. S.


Harrison, Col. J. H. (Eye)
Lucas-Tooth, Sir Hugh
Schofield, Lt.-Col. W.


Harvey, Ian (Harrow, E.)
McAdden, S. J.
Scott-Miller, Cmdr. R.


Harvey, John (Walthamstow, E.) 
Mackeson, Brig. Sir Harry
Sharples, R. C.


Harvie-Watt, Sir George
Mackie, J. H. (Galloway) 
Shepherd, William


Hay, John
McLaughlin, Mrs. P. 
Simon, J. E. S. (Middlesbrough, W.) 


Heath, Rt. Hon. E. R. G.
Maclay, Rt. Hon. John
Smyth, Brig. Sir John (Norwood)


Henderson, John (Cathcart)
Maclean, Fitzroy (Lancaster)
Spearman, Sir Alexander


Hill, Rt. Hon. Charles (Luton)
McLean, Neil (Inverness)
Speir, R. M.


Hill, Mrs. E. (Wythenshawe)
MacLeod, John (Ross &amp; Cromarty)
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) 


Hill, John (S. Norfolk) 
Macmillan, Rt. Hn. Harold (Bromley) 
Stevens, Geoffrey


Hinchingbrooke, Viscount
Maddan, Martin
Steward, Harold (Stockport, S.)


Hirst, Geoffrey
Maitland, Cdr. J. F. W. (Horncastle)
Steward, Sir William (Woolwich, W.) 


Holland-Martin, C. J.
Manningham-Buller, Rt. Hn. Sir R.
Stoddart-Scot, Col. M.


Hornby, R. P. 
Markham, Major Sir Frank
Stuart, R. Hon. James (Moray)


Horobin, Sir Ian
Marlowe, A. A. H. 
Studholme, Sir Henry


Horsbrugh, Rt. Hon. Dame Florence
Marshall, Douglas 
Summers, Sir Spencer


Howard, John (Test)
Mathew, R.
Taylor, William (Bradford, N.)


Hudson, Sir Austin (Lewisham, N.) 
Mawby, R. L.
Teeling, W.


Hughes Hallett, Vice-Admiral J.
Maydon, Lt.-Comdr. S. L. C.
Thomas, Leslie (Canterbury) 


Hughes-Young, M. H. C.
Medlicott, Sir Frank
Thomas, P. J. M. (Conway) 


Hulbert, Sir Norman
Milligan, Rt. Hon. W. R.
Thompson, Kenneth (Walton)


Hurd, A. R.
Molson, Rt. Hon. Hugh
Thompson, Lt.-Cdr. R. (Croydon, S.)


Hutchison, Sir Ian Clark (E'b'gh, W.) 
Moore, Sir Thomas
Thornton-Kemsley, C. N.


Hutchison, Sir James (Scotstoun) 
Nabarro, G. D. N.
Tiley, A. (Bradford, W.)


Hyde, Montgomery
Nairn, D. L. S. 
Tilney, John (Wavertree)


Iremonger, T. L.
Neave, Airey
Turner, H. F. L.


Irvine, Bryant Godman (Rye)
Nicholls, Harmer
Turton, Rt. Hon. R. H.


Jenkins, Robert (Dulwich)
Nicholson, Godfrey (Farnham)
Tweedsmuir, Lady


Jennings, J. C. (Burton)
Nicolson, N. (B'n'm'th &amp; Chr'oh) 
Vane, W. M. F.


Johnson, Dr. Donald (Carlisle)
Nield, Basil (Chester)
Vickers, Miss J. H.


Johnson, Eric (Blackley)
Noble, Comdr. A. H. P.
Vosper, D. F.


Johnson, Howard (Kemptown) 
Nugent, G. R. H.
Wakefield, Edward (Derbyshire, W.) 


Joseph, Sir Keith
Ormsby-Gore, Hon. W. D.
Walker-Smith, D. C.


Joynson-Hicks, Hon. Sir Lancelot 
Orr, Capt. L. P. S. 
Wall, Major Patrick


Keegan, D.
Page, R. G.
Ward, Hon. George (Worcester)


Kerby, Capt. H. B.
Partridge, E.
Ward, Dame Irene (Tynemouth)


Kerr, H. W.
Peyton, J. W. W.
Waterhouse, Capt. Rt. Hon. C.


Kershaw, J. A.
Pitman, I. J.
Whitelaw, W. S. I. (Penrith &amp; Border)


Kimball, M.
Pitt, Miss E. M.
Williams, Paul (Sunderand, S.)


Kirk, P. M.
Pott, H. P.
Williams, R. Dudley (Exeter)


Lagden, G. W.
Powell, J. Enoch
Wills, G. (Bridgwater)


Lambert, Hon. C.
Prior-Palmer, Brig. O. L.
Wilson, Geoffrey (Truro)


Lancaster, Col. C. G.
Profumo, J. D.
Woollam, John Victor


Langford-Holt, J. A.
Raikes, Sir Victor
Yates, William (The Wrekin)


Leather, E. H. C.
Rawlinson, Peter



Leavey, J. A.
Redmayne, M.
TELLERS FOR THE AYES:




Mr. Oakshott and Mr. Barber.




NOES


Ainsley, J. W.
Burton, Miss F. E.
Dugdale, Rt. Hn. John (W. Brmwch)


Albu, A. H.
Butler, Herbert (Hackney, C.)
Dye, S.


Allaun, Frank (Salford, E.)
Callaghan, L. J.
Edwards, Rt. Hon. John (Brighouse) 


Allen, Arthur (Bosworth)
Castle, Mrs. B. A.
Edwards, Rt. Hon. Ness (Caerphilly) 


Allen, Scholefield (Crewe)
Champion, A. J.
Evans, Stanley (Wednesbury)


Anderson, Frank
Chapman, W. D.
Fernyhough, E.


Awbery, S. S.
Chetwynd, G. R.
Fraser, Thomas (Hamilton)


Bacon, Miss Alice
Clunie, J.
Gaitskell, Rt. Hon. H. T. N.


Baird, J.
Coldrick, W.
Gibson, G. W.


Balfour, A.
Collick, P. H. (Birkenhead)
Gooch, E. G.


Bellenger, Rt. Hon. F. J.
Collins, V. J. (Shoreditch &amp; Finsbury)
Gordon Walker, Rt. Hon. P. C.


Bence, C. R. (Dunbartonshire, E.) 
Corbet, Mrs. Freda
Greenwood, Anthony


Benn, Hn. Wedgwood (Bristol, S. E.)
Cove, W. G.
Grenfell, Rt. Hon. D. R.


Benson, G.
Craddock, George (Bradford, S.)
Grey, C. F.


Beswick, F.
Cronin, J. D.
Griffiths, Rt. Hon. James (Llanelly)


Blackburn, F.
Crossman, R. H. S.
Hale, Leslie


Blenkinsop, A.
Cullen, Mrs. A.
Hall, Rt. Hn. Glenvil (Colne Valley)


Boardman, H.
Daines, P.
Hamilton, W. W.


Bottomley, Rt. Hon. A. G.
Dalton, Rt. Hon. H.
Hannan, W.


Bowden, H. W. (Leicester, S. W.)
Darling, George (Hillsborough)
Harrison, J. (Nottingham, N.)


Bowles, F. G.
Davies, Ernest (Enfield, E.)
Hastings, S.


Boyd, T. C.
Davies, Harold (Leek)
Hayman, F. H.


Braddock, Mrs. Elizabeth
Davies, Stephen (Merthyr)
Henderson, Rt. Hn. A. (Rwly Regis)


Brockway, A. F.
de Freitas, Geoffrey
Herbison, Miss M.


Broughton, Dr. A. D. D.
Delargy, H. J.
Hewitson, Capt. M.


Burke, W. A.
Dodds, N. N.
Hobson, C. R.







Holman, P.
Mitchison, G. R.
Skeffington, A. M.


Holmes, Horace
Moody, A, S. 
Slater, J. (Sedgefield)


Howell, Denis (All Saints)
Morrison, Rt. Hn. Herbert (Lewis'm, S.)
Smith, Ellis (Stoke, S.)


Hoy, J. H.
Mort, D. L.
Sorensen, R. W.


Hubbard, T. F.
Moss, R.
Sparks, J. A.


Hughes, Cledwyn (Anglesey)
Mulley, F. W.
Steele, T.


Hughes, Emrys (S. Ayrshire)
Noel-Baker, Francis (Swindon)
Stewart, Michael (Fulham)


Hughes, Hector (Aberdeen, N.)
Oliver, G. H.
Strachey, Rt. Hon. J.


Hunter, A. E.
Orbach, M.
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Hynd, J. B. (Attercliffe)
Oswald, T.
Summerskill, Rt. Hon. E.


Janner, B.
Owen, W. J.
Swingler, S. T.


Jay, Rt. Hon. D. P. T.
Padley, W. E. 
Thomas, George (Cardiff)


Jeger, George (Goole)
Paget, R. T.
Thomas, Iorwerth (Rhondda, W.)


Jeger, Mrs. Lena (Holbn&amp;St. Pncs, S.) 
Paling, Rt. Hon. W. (Dearne Valley)
Thomson, George (Dundee, E.)


Jenkins, Roy (Stechford)
Palmer, A. M. F.
Thornton, E.


Johnson, James (Rugby)
Pannell, Charles (Leeds, W.)
Timmons, J.


Jones, Rt. Hon. A. Creech (Wakefield) 
Pargiter, G. A. 
Tomney, F.


Jones, David (The Hartlepools) 
Parker, J.
Turner-Samuels, M.


Jones, T. W. (Merioneth)
Parkin, B. T. 
Ungoed-Thomas, Sir Lynn


Kenyon, C.
Pearson, A.
Warbey, W. N.


Key, Rt. Hon. C. W.
Plummer, Sir Leslie
Weitzman, D.


King, Dr. H. M. 
Popplewell, E.
Wells, Percy (Faversham)


Lawson, G. M.
Price, Philips (Gloucestershire, W.) 
Wells, William (Walsall, N.)


Lee, Frederick (Newton)
Probert, A. R.
West, D. G.


Lever, Leslie (Ardwick)
Proctor, W. T.
Wheeldon, W. E.


Lindgren, G. S. 
Pryde, D. J.
White, Mrs. Eirene (E. Flint)


Lipton, Lt.-Col. M.
Randall, H. E.
Wilkins, W. A.


Logan, D. G.
Rankin, John
Williams, David (Neath)


Mabon, Dr. J. Dickson
Redhead, E. C.
Williams, Rev. Llywelyn (Ab'tillery)


MacColl, J. E.
Reeves, J.
Williams, Rt. Hon. T. (Don Valley) 


McInnes, J.
Reid, William
Williams, W. R.(Openshaw)


McKay, John (Wallsend)
Roberts, Albert (Normanton)
Willis, Eustace (Edinburgh, E.)


McLeavy, Frank
Roberts, Goronwy (Caernarvon)
Wilson, Rt. Hon. Harold (Huyton)


MacPherson, Malcolm (Stirling)
Robinson, Kenneth (St. Pancras, N.)
Winterbottom, Richard


Mahon, Simon
Rogers, George (Kensington, N.) 
Woodburn, Rt. Hon. A.


Mallalieu, J. P. W. (Huddersfd, E.)
Shinwell, Rt. Hon. E.
Yates, V. (Ladywood)


Mann, Mrs. Jean
Shurmer, P. L. E.
Younger, Rt. Hon. K.


Mellish, R. J.
Silverman, Julius (Aston) 
Zilliacus, K.


Messer, Sir F.
Silverman, Sydney (Nelson)



Mikardo, Ian
Simmons, C. J. (Brierley Hill)
TELLERS FOR THE NOES:



Mr. J. T. Price and Mr. Deer.



Question put and agreed to.

Clause 22.—(TAXATION OF ASSURANCE COMPANIES DOING ANNUITY BUSINESS.)

Amendments made: in page 29, line 3, leave out from "who" to "is" in line 5.

In line 7, leave out "so defined)" and insert:
defined in section twenty of this Act)".—[Mr. H. Brooke.]

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. E. C. Redhead: I intervene on this Clause only to draw renewed attention to what we on this side of the Committee, and, I think, some hon. Members on the other side, feel to be a continuing defect in the Clause. It is regrettable that the Chancellor has not found it possible to seize the opportunity of the concession provided in this Clause for an encouragement and incentive to the wider adoption of the principle of transferability or inter-availability of pension schemes. Some of my right hon. and hon. Friends tabled an Amendment designed to give effect to that view, but it has not been called, and it would not, therefore, be

proper for me to discuss that Amendment in detail.
I want to recall attention to what we regard as a lost opportunity in making this concession—a not inconsiderable concession and one which might well have been accompanied by a condition that, if not completely comprehensive—and I freely admit that the Amendment that was tabled would not have covered the whole field—would have been an incentive for the development of what is an increasingly urgent necessity in respect of pension schemes.
It is common ground that there has been a considerable extension of occupational pensions schemes. The Phillips Report refers to the fact that about one-third of the working population is now covered by such schemes. That being the case, it is obvious that schemes of that character are welcome to the individual as offering a greater measure of security. Similarly, they are advantageous to individual employers, for one can appreciate their desire, particularly in the skilled trades and in times of difficulty, to retain their skilled workers and seek to bind them to their employers by the


attractions of a pension scheme. But, when these pension schemes become rivetted and accepted as part and parcel of the hidden remuneration attached to the job, it becomes increasingly difficult to give effect to the real need for the mobility of labour, which is so constantly stressed today.
The provision, similarly, acts as a deterrent to the venturesome spirit who seeks to depart from one field of employment to another, making fuller use of his opportunities and talents for advancement elsewhere, and a deterrent to the occupational pension scheme, in the absence of any aspect of transferability, becomes increasingly imperative in the mind of the worker or professional man as he gets older. The result is that industry as a whole loses by reason of the rigid isolated pension scheme, however important and valuable it may be.
Tremendous emphasis is put today on the necessity for the mobility of labour, and I would emphasise that that aspect is no less important in the field of occupational pensions schemes than it is elsewhere. Indeed, if these schemes are rigid, isolated and without the feature of transferability, there are some large problems looming up in the shape of recruitment to the new industries, which will find themselves in increasing difficulties because of the difficulty of obtaining the requisite people.
The Phillips Committee expressed this danger and this need—and I quote from paragraph 247—in these words:
… under present day conditions the national interest in its widest sense requires industry to respond rapidly to changes in demand and technological advances. The readjustment of manpower which will be entailed ought not to be impeded by any artificial restrictions arising out of pension arrangements. If the economy as well as the individual is to benefit from the free circulation of ideas and talent, it is particularly important that the technical and administrative staff in the higher posts should be able to change their employment without undue difficulty.
That is the essence of its general review of this problem, and I imagine that few of us would wish to quarrel with that judgment of the Phillips Committee. The principle is one which has been commented upon by the National Advisory Committee on the employment of older men and women, which emphasised that it was one of tremendous importance and one that merited full examination.
The Phillips Committee went a little further in paragraph 318 of its Report, in which it said:
The mobility of labour which is desirable if the economy is to remain progressive ought not to be restricted by the existence of occupational pension schemes. Many schemes already allow the retention of pension rights on a change of employment by granting a transfer value or a 'cold storage' pension. In our view, the time has not yet been reached when provision on these lines could properly be made a condition for tax relief;
The argument that was the justification for that latter opinion, unfortunately, has not been susceptible to debate in this House, inasmuch as we have not had the opportunity to discuss the Report of the Phillips Committee. Indeed, I think there are arguments for it.
The important thing that I want to bring to notice is the emphasis the Phillips Committee gave to the importance of this principle. There has been a very considerable acceptance of the principle of the desirability of the inter-availability of pensions scheme by the Government themselves in the public services, and what seems to be good and proper in the area of the public services is, I believe, no less urgent and important in the field of industry. If anything can be done to encourage the adoption of this principle on a wider basis, that opportunity ought to be seized, and we can only regret that opportunity was not taken in granting this concession to make it a condition that there should be an acceptance of this obligation.
I would draw the attention of the Chancellor to the fact that he need have no apprehensions on the workers' side about the extension of this principle, for there is a considerable body of support among the trade unions for its wider application, which was approved by the Non-Manual Workers Committee of the Trade Union Congress.
7.0 p.m.
The National Federation of Professional Workers, covering more than half a million black-coated workers, has repeatedly advocated it and made urgent representation for its expansion. So far, with private employers, it is largely a question of voluntary acceptance of the principle. If it is so imperative, as some of us believe, then it seems a pity to lose the opportunity of putting a little statutory encouragement, as could have


been done, in this Clause. I realise that there are difficulties attached to this principle, because of the various characters of the pension schemes, some contributory, some non-contributory, but I believe that if the inducement is there—and the inducement could have been provided in the Clause—many of those difficulties will be found to be by no means insuperable.
If the Chancellor's hesitation to meet the arguments advanced is for the same reason that the Phillips Committee refrained from making more positive proposals than it did, namely, a lack of comprehensive information about the present basis of the various schemes of occupational pensions, I urge the Government to take the opportunity, with their very much wider resources, of undertaking an examination to secure the requisite information, for, whatever be done in relation to the Finance Bill, it still remains an important issue which the Government ought to be tackling and expressing in a wider context.
If, in the course of that examination, the Chancellor feels that there are difficulties about it, as I freely acknowledge, I suggest that he direct his attention to the United States of America, Canada, Norway, Sweden, Holland, Belgium, and Denmark who, in this respect, I am advised, are well ahead of us in having met these difficulties and made provisions whereby the transferability principle is encouraged by statutory measures. I hope that the Government will think again about this broad principle, even though they have not found it possible, on this occasion, to give expression and encouragement to it in this Clause.

Mrs. White: I want, briefly, to say how glad I am that we have support for this principle from my hon. Friend the Member for Walthamstow, West (Mr. Redhead), who has had very great experience in these matters. I am very anxious that this evening we should have at least a slightly more positive reply from the right hon. Gentleman than we had when we discussed this matter earlier. After all, on at least two subjects of major importance the Chancellor has said that although he was not able to act this year he would do so in the near future. He positively gave a date for pioneer industries and he also gave a pledge about

Entertainments Duty in more general, but nevertheless specific, terms.
When we previously discussed the matter, the Financial Secretary gave an undertaking in very much vaguer terms. He said there was to be a review, but he did not say, as I hope he will say this evening, that this principle will be an important part of that review and that it will be carried out, partly at least, with the intention of seeing, as my hon. Friend has suggested, how this principle can most effectively be put into practice. I hope that the right hon. Gentleman will be more specific about what is an extremely important principle and one which will become more and more important with the extension of private pensions schemes.
The issue would be of much less consequence if these schemes were to be found only among a few benevolent firms, but their number is increasing very rapidly, as Professor Titmuss pointed out, largely because of tax concessions, and they are increasing in scope largely because, in general, the taxpaying body is contributing so much for the persons who participate in the scheme. It is a matter of justice that where such schemes are being supported out of public funds through these tax remissions we should most seriously apply ourselves to this very important principle which we have already discussed. I hope that we shall get the kind of answer from the right hon. Gentleman for which I have asked.

Mr. Gordon Walker: I should like very strongly to support the case put by my hon. Friend the Member for Walthamstow, West (Mr. Redhead) and my hon. Friend the Member for Flint, East (Mrs. White), although I do not want to add to their argument, but to raise another matter. We have to face the question which they raised, or we will have a tied economy with people tied to their jobs in the way that serfs used to be tied to the land, and, of course, that is the last thing we want. We want a mobile and flexible economy.
The issue which I want to put before the right hon Gentleman replies to my hon. Friends—I hope favourably—has worried me since we last discussed this subject. I am thinking in particular of subsection 7 (b), which admits schemes under the Finance Act, 1921, and which allows them to be handled by insurance


companies and the insurance companies to have a tax-free build-up. When the Bill was first before us, my right hon. and hon. Friends and I supported this provision. It seemed quite sensible. Of course, it was a considerable concession to insurance companies.
Insurance companies will handle a great deal of business which they were not handling before, but that seemed all right because the 1921 Act schemes—the Section 379 schemes as they are called—did not have a tax-free lump sum. Therefore, it seemed to us sensible and to everybody's convenience to include them, but it is now beginning to enter my mind that maybe under these schemes which we admit in this Clause, allowing insurance companies to handle and get all the benefits of tax-free build-up, we do not exclude tax-free lump sums as much as I originally thought.
As the right hon Gentleman knows, the insurance companies have been bringing a good deal of pressure to bear on the ground that Section 386 schemes should be brought within the ambit of the Clause as well, because otherwise there would be a massive switch from one to the other. In the course of arguing for that case they are giving me some alarm—and, I hope, giving the right hon. Gentleman some alarm, because he must have come across the arguments which they are deploying. Their argument is that it is silly to keep out Section 386 schemes on the ground that they will allow tax-free lump sums, because, if one is sufficiently skilful, one can have tax-free lump sums with Section 379 schemes. If that is the case, we are admitting tax-free lump sums which are meant to be excluded from the Clause.
Well-informed insurance companies dealing with this say that a number of such funds—that is funds which we are admitting in this Clause, 1921 Act funds, for instance—can and do pay lump sums which are tax free if they are skilfully managed and if there is what is called "tax manoeuvre". I believe—at any rate these people ought to know, and they say so in support of their case—that it is possible for the trustees of these funds which we are admitting under this Clause to reinsure their funds with insurance companies, and for the insurance companies then to pay those pensions tax

free, but set them off against their own annuity funds. In other words, both the insurance companies and the funds themselves gain at the general taxpayers' expense.
If it is true that by tax manoeuvre or manipulation it is possible to pay tax-free lump sums under either Section 379 or Section 388 schemes, we are very much more doubtful about the merits of subsection (7, b) than we were in Committee. I hope that the right hon. Gentleman can assure us that the arguments deployed by some insurance companies in support of their case are false, because if they are true the situation is extremely alarming. It means that by admitting section 379 schemes we are creating a yawning gap, which should attract the appetite of the right hon. Gentleman. Everyone will support him in any endeavour he may make to stop up that gap, if it does exist.
I hope that he can assure me that these insurance companies' arguments, with which he must be familiar—I am sure that these companies have been to him—are not true, or that, if they are true, he will do something about the question either now or in the next Finance Bill.

Major W. Hicks Beach: I apologise to the right hon. Member for Smethwick (Mr. Gordon Walker) for not being here when he made his speech. I had an engagement elsewhere.
I should declare my interest in this matter. I am a director of an insurance company. Those who are interested in the insurance business are very disappointed that the Financial Secretary has not thought fit to take more notice of the remarks we made in Committee concerning the great alarm with which we regarded the position of Section 379 and Section 388 schemes. The advice which I have received from many responsible people in the insurance world is that, if the Clause goes forward as it is now drawn, there will be a big switch over from Section 388 schemes to Section 379 schemes. In the long run, we say that the switch over will mean no tax saving for the Government and a vast amount of unnecessary work, in the re-submission of claims, for the Treasury and the insurance world.
We accept the view of the Government, which has been put forward on several occasions, that there should be no tax-


free build-up for a tax-free distribution by way of death benefit or any other form of benefit, upon retirement or otherwise. We accept it, but we do not agree with it, because it is contrary to the Millard Tucker recommendations.
During the Committee stage, we tried to impress upon the Government our view that Section 388 schemes should be allowed to have a tax-free build-up in relation to the annuity side of their pension schemes. That seems to us to be a reasonable suggestion. It would certainly assist a vast number of employees and others who are eligible for pensions, and I am very disappointed that the Government have not taken more cognisance of the very strong representations made to them by many insurance organisations and life offices concerned with Section 388 schemes.
In the next Finance Bill the Government will probably have to bring in an Amendment to deal with the situation. It is a great pity they have not done so in this Bill. People who have experience of the insurance business are quite certain that the Clause will be largely unworkable, will create a vast amount of work for the Revenue, and do a great deal of damage to many pension and insurance schemes which, after all, are for the benefit of employees. The Government should have given much more careful thought to what was said on this matter in Committee.

7.15 p.m.

Mr. H. Brooke: The fact that it was necessary to make two small consequential Amendments to the Clause has opened the way to a debate which has ranged over much of the ground that we covered at about 1 a.m. on 13th June. Few new points have been raised upon this occasion. The difference is that we are now discussing the question at a very much more auspicious time of day. The hon. Member for Walthamstow, West (Mr. Redhead) took up the point which was raised on 13th June by the hon. Member for Flint, East (Mrs. White), and once more called attention to the recommendation of the Phillips Committee that provision for transfer should be made a condition of approval of superannuation funds.
I thought that I was quite definite in what I said to the hon. Lady upon that

previous occasion. This is not the right way to tackle the question. We are dealing here with the self-employed, and only in one small respect is it necessary to slop over, as it were, into the question of pension funds for the benefit of employees. On behalf of my right hon. Friend the Chancellor, I have said that considerable work has to be done upon that other question. Recommendations set out in black and white must be further examined, and it may well be that some clearing up of the law upon that large subject will have to be done by Parliament in some future year.
There was some question that I was not forthcoming upon the matter, or that the Government were trying to pigeonhole it. On the contrary, the Government are not overlooking its importance. I indicated—and I believe that it is common ground among Members on both sides of the Committee—that this would be the wrong place in which to tackle the question. Moreover, the Amendment put down in our earlier proceedings and again today would deal only with funds that reinsure their liabilities with life insurance companies. It would not touch other funds or pension schemes which are not operated by means of trust funds. I am sure that the prospective movers of the Amendment realise that.
If we are going to grapple with this question, it would be quite wrong to put a special condition upon one rather narrow category of pension scheme while leaving the other categories alone.

Mrs. White: I admit the force of what the right hon. Member is saying, but may we nevertheless have from him a declaration that the Government regard transferability as desirable in itself, even though the details of working it out may take some time?

Mr. Brooke: There is no question whatever that provisions to assist the mobility of labour are good things in themselves but, as I said on the previous occasion, when we tackle this matter we have to bear in mind the fact that there is an alternative method, which is much more widely adopted at the present time than transferability of pension rights, namely, the cold storage pension system, by which the pension that a man has earned up to the date of his leaving a


certain firm, is kept in cold storage until he reaches retirement age. It is more use than the transferability provisions now being canvassed, if the employer to whom he is going has no pension scheme to which his rights could be transferred. But that is our approach to the matter. We recognise the importance of this, and I have made plain that in the future Parliament is likely to have to spend time on the law relating to pensions schemes for employees.
The right hon. Member for Smethwick (Mr. Gordon Walker) asked me about subsection (7) of the Clause, because it had come to his attention that there might be means whereby insurance companies could drive a coach and four through what Parliament thought it was doing. I can give him an absolute assurance that, so far as I am any judge of the matter, the fund approved under Section 379 cannot possibly pay lump sums. Of course, it is quite possible to have a Section 388 scheme as well, and a 388 scheme can pay a lump sum. But the Clause, as we have drafted it, will, we think, effectively safeguard against the kind of thing happening which he is envisaging. Certainly, we shall watch carefully to see that it does, but we cannot perceive loopholes through which malpractices might arise.
The right hon. Gentleman appears to be thinking of cases where the trustees of funds deliberately try to get round the intention of the law. These matters are extremely complicated, and I should be willing to discuss and examine the question further. I am ready to go so far as to say that, if any flaw is discovered here, we should be prepared on a future occasion to examine carefully whether that loophole should be closed. But we believe that the law is flawless in that respect.
My hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) referred to the substantial question, which he very properly raised during the Committee stage debates, of whether there was likely to be a large-scale switch over from the Section 388 schemes to the Section 379 schemes. There is a difference of opinion between my hon. and gallant friend and his friends and the Government on this matter. I hope that he will not press the phrase, which I think he

used, that the Financial Secretary appears to have taken all this very lightly. The Financial Secretary has given careful attention to this since we discussed the Clause before. I have discussed it personally with the Chancellor and with our advisers.

Major Hicks Beach: I do not suggest that the right hon. Gentleman took this lightly, but I do say that he said that all his advice has been contrary to what is thought by those people knowledgeable in matters of insurance, and I wonder whether he would tell us who have been his advisers.

Mr. Brooke: Not all those people knowledgeable in insurance matters share the views of my hon. and gallant Friend. We think that we have drafted the Bill rightly. The hon. and gallant Gentleman disagrees, and I understand that it will not be possible for him to move a Clause which he has put down for Report stage, because, technically, it is out of order. I can but add, as I was saying a few minutes ago, that the Government will carefully and meticulously study the law relating to pension schemes for employees. There may be changes which it will be necessary for my right hon. Friend to bring forward upon a future occasion.
I strongly suggest to those people who are thinking of changing over, or advising their clients to change over without delay from Section 388 schemes to Section 379 schemes, to bear in mind the words which I used the other day and which I use again now: that the law relating to these pension schemes is not necessarily going to remain as it is indefinitely. If they are too hasty in switching, they may find that in fact they have made a mistake against their own interests.
I cannot make any forecast. I cannot say what form any future Bill presented to this House may take. But I ask them to bear in mind that there is a greater element of uncertainty in the future state of the law on this matter than perhaps they may have realised when some people spoke with such assurance of the likelihood and indeed the great interest and great advantage to employers of switching over on a large scale.
At this stage, neither my hon. and gallant Friend nor I can prove which of us is right. Experience will show that, and one or other of us may have to climb


down. But I must advise him that the Chancellor does not see his way to amend this Clause further. I hope that he will let it rest that there is a genuine difference of opinion between us, each of us very sincerely holding the view that we do.

Mr. Frederick Gough: I wish to add a word to what has been said by my right hon. Friend. I have stated to this Committee before that I have an interest in this matter, as I am actively engaged in this type of business. I have also expressed my view, which is the same as that of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach). There has been a great deal of concern in the professional insurance world about the fact that Section 388 schemes were not to receive the same benefit, but I am sure that everyone will be greatly relieved by the remarks which have just been made by my right hon. Friend.
I wish to add these few points about Section 388 schemes if it is in order to do so. There are a large number of them and most apply to small firms and to lower paid employees. It is for that reason that those responsible have been so concerned, and I can assure my right hon. Friend that up to the very moment when he made his statement it was the intention of those responsible for this business of pensions schemes to seek ways and means whereby they could have transferred the non-commutable portion of such schemes into schemes which would have received the benefits now being given. I think and hope that what my right hon. Friend has now said will at least allay the suspicion of such people, and I am sure that they will be prepared to be patient for a year or so.
I should like to add my plea to him to bear in mind that in this Section he will be dealing with a far greater number of pensions schemes than in the one with which he is now dealing, and that he will be referring to schemes which mainly provide pensions for the lower salary and wage grades in the country.

7.30 p.m.

Mr. Mitchison: I have been listening with wonder and amazement to what has been going on. I must dissociate myself from what I regard as a rash and hazardous charge; I should think it most unlikely that the Financial Secretary ever

took anything lightly, certainly, I hope, not this Clause.
I feel that in this as in other respects we always benefit from the full and impressive weight of his intellect on these matters. Personally, I have not that sort of intellect, and I am a little encouraged to see that even the minority of the Millard Tucker Committee, when considering this matter, suggested a much simpler solution by increasing the relief on ordinary life insurance premiums. I do not know whether the hon. and gallant Member for Cheltenham (Major Hicks Beach) and the hon. Member for Horsham (Mr. Gough) voted against that simple solution when we made it the other night; perhaps they supported us and I did not notice them.
One of the reasons given by the minority members of the Millard Tucker Committee was that
it would avoid the enormous administrative complexities inseparable from the recommendations
—those being more or less the recommendations which we are considering. They stated that
it would also obviate the risk of the extensive re-writing of existing assurance contacts which these recommendations, if adopted, might entail.

Mr. Gough: I think that the hon. and learned Member misses the very point I made, which is that the majority of these schemes under Section 388 deal with people in lower income groups who would not benefit from Income Tax relief on life insurance policies. I know about the "top hat" schemes, but they represent a small section, and I am going back 20 or even 30 years. In my opinion, these schemes deal largely with people in the lower income groups, about whom I am particularly concerned.

The Temporary Chairman (Mr. H. Hynd): Order. This debate is going rather wide of the Clause. I hope that hon. Members will confine their remarks to what is in the Clause.

Mr. Mitchison: With great respect, Mr. Hynd, in this matter I am following in the footsteps of the Financial Secretary, who read his hon. Friends a rather stiff lecture about not rewriting existing assurance contracts because if they did there was always the possibility of the Treasury changing the law, and for once life insurance companies might almost make a loss


if they did not follow his advice. Perhaps it was not as bad as that; let me reassure the hon. Member for Horsham that the companies will probably struggle through, as they usually do.
All I am saying for the moment—and I make no comments on the merits of the matter—is that I have every possible sympathy with the minority members of the Millard Tucker Committee when they refer to
the enormous administrative complexities
and consider as possible an
extensive rewriting of existing assurance contracts.
I am engaged in mildly teasing the hon. and gallant Member for Cheltenham and the hon. Member for Horsham, because I did not see them in the Labour Party Lobby the other day when the much simpler alternative was proposed.
A second point which I desire to make relates to the question of transferability. It appears to be generally agreed now that there ought to be transferability. I should have thought that that was fairly obvious and I should not have thought we needed even the Phillips Committee, although that Report adds much weight to the point. What puzzles me is this: I entirely agree that in the Finance Bill as it stands we cannot deal with the whole question. Of course, if there were provisions which would enable us to do so, no doubt such an astute and intelligent Opposition as we always are would have put down Amendments to cover the whole shooting match.
All we could do was to put down an Amendment to what the Government had put down about this type of contract—reinsuring with an insurance company. I take a very simple point about it. The poor life insurance companies, the people who will be in such difficulties, an impoverished lot as we all know—those who are doing annuities business—are now to get some benefit out of Clause 22. They may not like it, but they are supposed to be getting some benefit or another.
When that was being done it was not altogether unreasonable, I should have thought, to impose a condition the necessity for which I understand the right hon. Gentleman is prepared to admit. I do not mean the taxation necessity; I mean the social necessity. If, of course, the right hon. Gentleman wants to make

a larger and more comprehensive scheme later, no doubt he can alter any concession he has made here in order to tailor it in with what I may vulgarly call the whole shooting match—and all will be well. After all, mere complication is no objection to a Finance Bill or we should hardly ever have one, except about very simple things. Surely the opportunity could have been taken when making this concession——

The Temporary Chairman: Order. We must discuss now only whether or not we want to accept Clause 22 as it stands.

Mr. Mitchison: With great respect, it is with relevance to that point that I pointed out one omission from Clause 22.

The Temporary Chairman: It is not in order to point out omissions. We can discuss only what is in the Clause now. and whether we accept it or not.

Mr. Mitchison: With great respect, I thoroughly realise that, but if I may say so, I cannot treat the Clause as perfect. I notice that it is deficient in one matter; and I am calling attention to that deficiency. I hope I have done so. Others besides myself have called attention to it. The question is whether we take it in the imperfect form or whether we wait for perfection.

Mr. J. T. Price: I apologise for intervening for a few moments, particularly because I was unavoidably prevented from hearing all the remarks of the Financial Secretary. The remarks which I did hear seemed very prudent about the danger of any reckless chopping and changing at this stage, when legislation is in a tentative and experimental form.
If I am in order—and I hope I am—I want to draw attention to a more serious anomaly than that to which the hon. Member for Horsham (Mr. Gough) drew attention. Whereas, under this legislation, it is proposed to give the self-employed person the advantage of complete relief on all his contributions in assessing his liability to taxation, there is a very large class of contributing members who are covered by insurance company schemes, not under Section 38 but under Section 225.
I speak more particularly of many thousands of workers in industrial funds who do not, under existing legislation, obtain a full remision of tax liability.

The Temporary Chairman: Order. It is not in order to discuss that, because it is not in the Clause, and we can discuss only what is in the Clause.

Mr. Price: I expected your rebuke, Mr. Hynd, but, with the greatest respect to the Chair, it makes it very difficult to consider this Clause and what is in it in its right perspective, on Report stage—not Third Reading——

The Temporary Chairman: This is not the Report stage; it is the Committee stage.

Mr. Price: I plead guilty to error. Perhaps I may be excused, as, like others, I sometimes have to leave the Chamber to eat.
Nevertheless, without making an elaborate case, I would point out that we are coming to a class of new entrants who will be able to buy annuity insurance from insurance companies or enter into schemes which are administered for groups of people who will be in a relatively better position than many thousands of people in existing schemes. I commend to the Treasury a close review and investigation of that situation, even if we cannot deal with it now in a formal sense.

Mr. Gordon Walker: A good deal of the argument which we have been having has turned on the question raised by the hon. and gallant Gentleman the Member for Cheltenham (Major Hicks Beach) and the hon. Member for Horsham (Mr. Gough), that if this Clause stands part of the Bill in its present form there will be a great switch from insurance schemes under Section 379 to those under Section 388. The right hon. Gentleman, in meeting this charge amongst other arguments deployed the one that it would be unwise of anyone to switch in this way because he and his right hon. Friend the Chancellor had it in mind, in effect, to bring Section 388 schemes within the scope of this Clause at a future time.

Mr. H. Brooke: I did not say anything of that character. I said that there would have to be a general review of this legislation. I could not forecast how it would turn out, but I said that it might be necessary to amend the law in some respects. I did not intimate any particular respects.

Mr. Gordon Walker: I think that the right hon. Gentleman must have meant that it was to be amended in such a way as to meet the charges made by his hon. Friends, otherwise what he said was entirely irrelevant to their remarks. He said that he did not recommend anyone to switch, certainly on a massive scale, because he hoped that those thinking of it would bear in mind what he was about to say. That must relate to a switch, and the things in the future must, I think, be designed to reduce the difference existing now between Section 388 and Section 379 schemes. If not, I do not know what he meant.
I hope, however, that the right hon. Gentleman will bear in mind that we would be bitterly opposed to giving to Section 388 schemes this sort of benefit if they continued to pay tax-free lump sums or anything like that. We would be very strongly against that, and against anything that opened the door to the danger of tax avoidance; all the more so because I was not very satisfied with the answer which the right hon. Gentleman gave to me about tax avoidance under the Clause as it now exists—without altering a word of it or mentioning anything not in it.
There is evidence that the Clause as it exists has some loopholes in it, and some of the interests, and the hon. and gallant Member for Cheltenham and the hon. Member for Horsham mentioned the interest they had—have been putting forward arguments which do, in effect, say that it is no good limiting it to these Section 379 schemes, because one can, in fact, do in these schemes all those things such as paying tax-free lump sums that it is said cannot be done.
Some of the interests say that this applies in particular to partially unapproved schemes. It seems to be those that open the gap. The right hon. Gentleman said he would look into this. As I understand, it is the partially unapproved schemes which, if skilfully managed, can have a tax-free build-up—the partially unapproved schemes which certainly are not intended under the 1952 Act to be able to have a tax-free build-up but which, skilfully managed, can accumulate gross, as the term is. The benefit under this Clause will, therefore, accrue to insurance companies.
The danger even goes so far as this, as I understand. It is the Section 379


schemes which offer the greater opportunities for tax manoeuvre, owing to the method of funding. That is very startling. It seems to me that the arguments now being advanced to support a case with which I have a great deal of sympathy have gone so far that they really make us on this side very doubtful indeed whether we still support subsection (7, b), because if these loopholes that allow insurance companies in under the Section 379 schemes exist then we really have let something into this Bill that we should not have let in.
I hope that when the Chancellor considers what he is to do about Section 388 schemes he will give very serious attention to the possibility of loopholes now existing in his own Finance Bill and will, indeed, give priority to stopping such loopholes before beginning to try to stop switches——

7.45 p.m.

Mr. Gough: I am sure that the right hon. Gentleman will forgive me, but, for the record, I should like to correct one thing which he has said. I do not think that my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) and I were drawing attention to any loophole. We were merely drawing attention to the normal human factor that when someone finds that there is a better type of contract to be obtained, he merely ceases one contract—or that portion of it which is non-commutable—and goes to another. There is no loophole in that.

Mr. Gordon Walker: I was not referring to that. I quite agree with the hon. Member that there is danger of a switch. How far it goes I do not know, nor would I call that an improper thing to do. What I say is that, in arguing for bringing in Section 388 schemes, certain insurance interests have gone so far that they are now proving that Section 379 schemes do not have the merits which we thought they had, but that, in fact, they allow tax-free lump sums to be paid out or a tax-free build-up if skilfully managed.
That is a most disturbing thing. I did not say that either hon. Gentleman said that, but that some of the interests with which they are openly and freely associated have been saying that Section 379 schemes do not stop tax-free lump sums as we thought they did. It is extraordinary that, in their trying to prove that

Section 388 schemes should come in we discover these horrible things, which none of us on this side suspected, about Section 379 schemes. It really opens out a field of tax avoidance of a sort which, while obviously not illegal, does defeat the clear intention of the original 1952 Act—and, indeed, of the 1921 Act.
That should be stopped, because it really does not go on all fours with the previous Clauses of Part III of the Bill that we have now passed. If they have not come to his notice perhaps I could pass on to the right hon. Gentleman some of the arguments that have been given, so that he will know where and what to look for.

Clause, as amended, ordered to stand part of the Bill.

Second Schedule.—(OFFICES AND EMPLOYMENTS (PROVISIONS APPLICABLE TO CASES I, II AND III OF SCHEDULE E).)

Amendment made: in page 54, line 49, at end insert:
(3) For any such year of assessment, the emoluments excepted from Cases I and II as foreign emoluments shall not include emoluments of a person resident in the United Kingdom from an office or employment under or with a person, body of persons or partnership resident in that Republic.—[Mr. H. Macmillan.]

Schedule, as amended, agreed to.

New Schedule.—(RETIREMENT ANNUITIES; ADJUSTMENTS OF LIMIT ON QUALIFYING PREMIUMS.)

PART I HOLDERS OF PENSIONABLE OFFICE OR EMPLOYMENT

1. Subject to the following paragraphs, in the case of an individual who is the holder of a pensionable office or employment, the proviso to subsection (1) of section twenty-one of this Act shall have effect with the substitution for the references to seven hundred and fifty pounds of references to seven hundred and fifty pounds less one-tenth of his pensionable emoluments for the year of assessment.
2. Where an individual is the holder of a pensionable office or employment during part only of the year of assessment, then—

(a) the foregoing paragraph shall not apply if the condition in paragraph (a) of subsection (1) of section twenty of this Act is not satisfied at any time during that part of the year; but
(b) if the condition is satisfied at such a time and is also satisfied at a time during the remainder of the year, the foregoing


sub-paragraph shall apply but for one-tenth there shall be substituted therein such less proportion as may be just.

3. For the purposes of this Part of this Schedule an individual's pensionable emoluments for any year of assessment shall be taken to be the amount, estimated in accordance with the provisions applicable to Case I of Schedule E, of any income of his for the year (but not including in the case of a married man income of his wife), being either—

(a) income arising in respect of remuneration from any pensionable office or employment; or
(b) income from any property which is attached to or forms part of the emoluments of any pensionable office or employment.

PART II PERSONS BORN IN OR BEFORE 1915

4. Subject to the following paragraph, in the case of an individual born at a time specified in the first column of the Table set out below, the proviso to subsection (1) of section twenty-one of this Act and Part I of this Schedule shall have effect with the substitution for the references to seven hundred and fifty pounds and to the fraction one-tenth of references respectively to such sum and to such percentage as are specified for his case in the second and third columns of the Table.

TABLE


Year of Birth
Sum
Percentage


£


1914 or 1915
825
11


1912 or 1913
900
12


1910 or 1911
975
13


1908 or 1909
1,050
14


1907 or any earlier year
1,125
15

5.—(1) This Part of this Schedule shall not apply in relation to any year of assessment in which the individual, in respect of his past services in any office or employment formerly held by him (not being one in which he served part-time only), either—

(a) receives any income in respect of a pension payable under or in pursuance of a sponsored superannuation scheme or otherwise purchased or provided for him by another person; or
(b) has a right under a sponsored superannuation scheme to a pension which is not presently payable, whether because it is suspended or because it is to become payable only at a future time or on the happening of some contingency (but not including a right dependent also on service in an office or employment for the time being held by him).

(2) In this paragraph, "pension" includes any superannuation or other allowance or deferred pay.—[Mr. H. Brooke.]

Brought up and read the First time.

Mr. H. Brooke: I beg to move, That the Schedule be read a Second time.
We had a sort of preliminary run on this matter when we were discussing Clause 21, but at that time we were really addressing ourselves only to one particular point and I think that the

Committee would probably wish me very briefly to describe the two Parts of this Schedule, after which, if there are any questions about them, an endeavour will be made to answer them.
Part 1 makes the necessary adjustment to the upper limit of £750 for those whose earnings consist partly but not wholly of pensionable salary. This is linked with the matter with which we were dealing a few moments ago, the matter which was originally brought to the attention of the Committee by my hon. Friend the Member for Carlton (Mr. Pickthorn). The effect of Part 1 is that a man with both a pensionable post and non-pensionable earnings will be allowed self-employed relief up to 10 per cent. of the pensionable earings, but the limit of£750 a year on the amount eligible for relief will be reduced by 10 per cent. of the pensionable emoluments.
Perhaps it would be better if I were to give this explanation by a practical example. Taking purely hypothetical figures, let us consider a case of a man with non-pensionable earnings of £5,000 a year and a pensionable salary of £4,000 a year. He could get this self-employed tax relief on an amount of£350 a year, that is to say the full £750 a year minus 10 per cent. of his pensionable salary of £4,000. He could in that way add on top of the existing pension in respect of his £4,000 salary the pension which would be appropriate to further earnings of £3,500 to bring his total pension up to the maximum appropriate earnings of £7,500. That is the effect of Part 1.
Paragraph 2 deals with complicated cases where a pensionable employment is held for one part of a year and non-pensionable earnings arise in the other part; in certain circumstances there may be an overlap between them. I hope that we have provided for all those rather special cases. Paragraph 3 defines what is meant by "pensionable emoluments".
Part II of the Schedule gives effect to the promise which I was authorised by my right hon. Friend to make during the earlier stage of our debates, that we would introduce later a scheme which would increase both the percentage and the permitted upper limit for people born before 1916. It has throughout been the general view of the Committee on both sides that it would be welcomed if the Government could introduce into their


Budget proposals a provision of this sort for older self-employed people who have not hitherto been able to make provision for their pensions except out of taxed income.
This is all based on the figure of £750 which has been the subject of controversy, but I do not think it is that that we are discussing now so much as the special arrangement which is to be made. This special arrangement would operate whatever the basic figure was for the older people. Part II increases the normal limits for this self-employed tax relief on a sliding scale according to age. The reason why there is no increase for those who reach the age of 40 this year or later is simply this, that they still have time to build up an adequate pension before they reach retiring age. The trouble was, as was pointed out earlier, that premiums limited to 10 per cent. of earnings would often not build up a pension having a reasonable relation to earnings in the remaining years available for the older people.
It is proposed that the percentage shall be increased by 1 for each 2 years of age over 40, up to a maximum of 15 per cent. for those who will be 49 or more this year, and the overall limit of £750 is correspondingly increased. I ought to point out that these increases apply to the two-job man who is dealt with in Part I of the Schedule as well as to the ordinary self-employed person.
The broad object of these arrangements is to compensate the older men for the fact that self-employed relief was not available to them in the earlier years up to now. Therefore, it seems to the Government that there is no ground for allowing these increases, that is to say the higher limits, to operate for those who, though they are self-employed now, were in pensionable employment in the past and are now either receiving a pension or have what is called a frozen pension which will become payable when they reach retiring age; though even there one has to make a further refinement, because we want to be as fair as we possibly can to everybody. There may be a case where the past pensionable employment was only a small part-time one, and in such a case it seems that it would really be unfair to exclude a person from these advantages. Consequently, Part II

is drafted so as to exclude those who have pension rights from past whole-time jobs, but not the others.
Those who are excluded because of their past pension rights, will still be able to qualify for relief up to the normal 10 per cent, or £750 from their present self-employment; it is only the increase which they will not get.
The Committee would, no doubt, wish me at this stage to give an estimate of the cost. Questions were asked when we discussed the matter before as to what this extension for the benefit of the late entrants would cost, and I said that at that stage it was really impossible to make any sufficiently reliable estimate. We have been examining this matter further and, though, of course, everything depends on the proportion of people who take advantage of the new opportunity—and everything I say must be subject to that safeguard—we estimate that the cost will be increased by this provision for the late entrants by something of the order of one-quarter. In other words, if the scheme as it stood before was going to cost £30 million, we think the cost will now be £37½ million, or, if it was going to be £40 million, we think it will be increased to£50 million. I think the Committee has appreciated throughout that it is not through any lack of arithmetical aptitude but solely through the sheer impossibility of prophecy that it is not possible to give firm figures. So far as we can see, bearing in mind that probably a good many of these late entrants will wish to take advantage of this arrangement, since they are the people who have been suffering most up to now, we are inclined to think that it will increase the cost of the scheme by about 25 per cent.

Mr. Mitchison: Before the right hon. Gentleman leaves that topic, would he just deal with one point? He has been talking about people of a certain age. This is calculated by reference to the year of a person's birth, and therefore the ages will differ. I should have thought that the cost of the scheme, or the proportion it bears to the cost of the whole scheme, is going to differ in succeeding years. Can the right hon Gentleman give any estimate of that?

Mr. Brooke: I think we must speak in very general terms. I was not thinking so much of the first year, this particu-


lar short year which we are now in. I was rather forecasting that, when the scheme gets going, the cost may be increased by something like one-quarter. I would not like to carry my figures beyond that, because it will be possible when the scheme has run for a year or two to see how we are going. At present, all we can do is to indicate that, in the first full year when the new plan is operating, we think that if the Committee accepts the proposals for late entrants in the new Schedule, the cost will be increased by about one-quarter.

8.0 p.m.

Mr. Mitchison: I am grateful to the right hon. Gentleman for giving a fairly full explanation of what, I am sure he will agree, is a very complicated provision. I should like to ask him one or two questions. First, am I right in thinking that Part I of the new Schedule departs substantially from the recommendations which the Millard Tucker Committee made on the same point?
I am not going back to discuss the question as between £500 and £750, but I think the right hon. Gentleman will agree that the existence of the provision in Part I of the new Schedule meets at least some of the points which were put forward in support of the increase from £500 to £750. Without going back into the merits of that matter, it appears to that extent to make that increase less necessary.
Part II of the proposed Schedule is intended to deal with the persons whom the right hon. Gentleman described as the late entrants. He referred to them persistently by their ages. I think—I speak subject to correction—that the Millard Tucker Report, when considering similar questions, also referred to them by their ages. What the Government have done, however, is to define those ages by reference to the year of birth. Consequently, it seems—I am not objecting to it; I want to know the position—that the advantage that is given to this type of entrant will diminish as the years go on. On balance, fewer and fewer of each group will be coming in.
While I take all of the reservations made by the right hon. Gentleman about the difficulty of estimating what proportion of the total amount this will represent, it does seem to be a tapering proportion. If that is the case, so much the better. If we had had to consider this

type of provision in the light of the £500 figure, we should not have taken the same objection to it that we now take.
I shall not discuss that now because, later, we shall come to some Amendments of our own which will involve references, if we are allowed to introduce them, to a number of Amendments to the new Schedule which appear in pages 3998 and 3999 of the Notice Paper.

The Temporary Chairman: The hon. and learned Member will be aware that those Amendments have not been selected.

Mr. Mitchison: I am well aware of that as regards the Amendments in pages 3998 and 3999 of the Notice Paper, Mr. Hynd, but I would point out that the Amendments on Report, to Clause 21, in pages 4008 and 4009 of the Notice Paper, seem to me to raise questions which involve consideration of the figures mentioned in those Amendments. I am not attempting to discuss those Amendments now——

The Temporary Chairman: I am trying to help the hon. and learned Member. The position is that those Amendments could possibly be discussed on the Report stage when we come to those pages of the Notice Paper. If those Amendments are selected by the Chair, they could be moved then as manuscript Amendments.

Mr. Mitchison: I am obliged, Mr. Hynd; I hoped that that was the position. All I was doing was partly to safeguard the position as regards the future Amendments and partly to point out to the Financial Secretary, who must be weary with obstruse mathematics, that if he wanted to avoid a little simple arithmetic he would find the figures corresponding to £500 on the next two pages of the Notice Paper, although, of course, as Amendments I could not refer to them.
Those figures—I can, if necessary read them out as a matter of mathematics, but they are there on the Notice Paper—represent somewhat more reasonable sums. It is perhaps about as good an illustration as one can have of the difficulties into which the £750 limit gets us that when one comes to apply it on quite reasonable lines to the late entrants, one gets up to figures as high as those which appear at the bottom of the table at the end of Part II of the new Schedule.
When, in a year of financial crisis, notwithstanding the Premium Bonds, we are compelled to allow people to have special concessions in respect of tax up to amounts on either side of £ 1,000, we wonder whether we have not set the whole business rather too high. I make that comment accepting provisionally the fact that this appears to be an annually tapering provision. I should like to know whether I am right on this latter point.
There is one other question I want to ask, similar to the one I wanted to ask about Part I. Here again, this seems to me to differ from recommendations made on exactly the same point by the Millard Tucker Committee. They appear, I believe, in paragraph 400, in page 111, of the Millard Tucker Report. As the right hon.Gentleman has been good enough to say that he would answer questions, perhaps he will answer one rather general question.
It apparently required the assiduous efforts of the hon. Member for Carlton (Mr. Pickthorn) to induce the Government to take account of these cases, but I feel certain that the Government did not stop reading the Millard Tucker Report at any point. It is not very long and they must have read it all through. Why did they leave the hon. Member for Carlton to remind them about these types of case, and why did they not follow up the Millard Tucker Committee when they came to deal with them? I hope that the right hon. Gentleman will answer these matters while the opportunity is still ready and ripe for him. He is to get more of them presently.

Mr. Stevens: All I want to do, on behalf of my hon. Friends, is once more to thank my right hon. Friend the Chancellor of the Exchequer for accepting the persuasive arguments which some of us used at an earlier stage of the Bill, partly for the two-job people and partly for the old boys like myself.
I heard the how and learned Member for Kettering (Mr. Mitchison) express surprise that in a crisis year these large figures, up to £1,125, should be contemplated; but the hon. and learned Member has clearly forgotten what my right hon. Friend the Chancellor of the Exchequer was so careful to point out—

that this is not consumer spending, but, on the contrary, is a form of saving, because the premiums are paid to insurance companies and go to swell the gross total of the national savings. I should have thought that that was a good thing for the nation as well as being a reasonable thing for the individual concerned.
Welcome as I find these proposals, I do rather regret the limitations which have been imposed. I think that my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) was so right when he pointed out that the vast majority of self-employed persons, whether they be professional, or garage proprietors or shopkeepers, do not belong to the category of wealthy friends of hon. Members opposite who start with £7,500 a year when they are 21. We do not mix with that type of person who has been referred to in our debates today.
Very few self-employed people reach £7,500 a year at all, and of the very few who do, I think that they earn it and deserve it, and they reach it only in the last three or five years of their working lives. The consequence is that these stories of people who have been working for years for £7,500 a year, or have worked for 10 or 15 years at £1,125, are so exaggerated they can be dismissed as untrue.
No, far from feeling these figures are excessive, I look forward to a future Budget and Finance Bill in which my courageous and right hon. Friend the Chancellor will give full expression to what I think most of us feel in our hearts as being just to senior civil servants, just to the chairmen of nationalised boards, just to retired officers of the three Services, just also to self-employed persons, and put in figures substantially higher than those which we are considering at the present.

Mr. Mitchison: May I ask the hon. Gentleman whether I could summarise his speech in this way, by reference to another accountant, the turf accountant in the well-known book called "Love on the Dole," whose cry was, if I remember aright, "The sky's the limit"?

Mr. Stevens: The hon. and learned Gentleman's choice of reading matter, of course, I must leave to him. I have not read that book. [HON. MEMBERS: "Shame."] I would refer the hon. and learned Gentleman to a speech made by


his right hon. and learned Friend the Member for St. Helens (Sir H. Shawcross) at a meeting yesterday, and widely reported in the Press today. I am sure that he is of one opinion with his brother lawyer.
As I say, I think my right hon. Friend is much to be thanked by hon. Members in all parts of the Committee for doing something for the self-employed even though at present he has not brought them up to the level of senior civil servants, retired officers of the three fighting Services, and the chairmen and members of the nationalised boards. The hon. and learned Member for Kettering suggested that Part 1 of the Schedule goes beyond Tucker. What he evidently has forgotten for the moment is that Part II does not go as far as Tucker. I once again express my thanks to my right hon. Friend.

Mr. H. Brooke: I am very much obliged to my hon. Friend the Member for Langstone (Mr. Stevens) for what he has said. I shall try in a minute or two to answer the questions of the hon. and learned Member for Kettering (Mr. Mitchison). I think he was slightly confused about my hon. Friend the Member for Carlton (Mr. Pickthorn). It was not due to him that we discovered that there were potential late entrants. We certainly knew that all along. What I said was that my hon. Friend was the first person to draw the attention of the Committee to the problem of the two-job man.
The hon. and learned Member asked whether, under Part I, we were departing from the Millard Tucker Committee's recommendations for the two-job man. I am not quite sure what the answer is, because the Millard Tucker Committee made no recommendations on that type of person. We have devised this scheme which we hope will do justice. All of us, on both sides, recognise the debt we owe to the members of the Millard Tucker Committee. I think that the hon. and learned Member, although he correctly spotted another item of the Report, will have to search long before he finds the two-job man there.

Mr. Mitchison: Is not this really a case of the partially provided for employees?

8.15 p.m.

Mr. Brooke: No. The partially provided for employee is a different case where the man is in a pension scheme, but it is a scheme of a character which will produce a pension that is quite out of line with the type of pension for which a man in an ordinary, full pension scheme would expect to qualify.
With regard to Part II the hon. and learned Member was entirely right in saying that we have departed substantially from paragraph 400 of the Millard Tucker Report, and that is primarily because, having examined with care and sympathy the Millard Tucker Committee's recommendations for potential late entrants, we found the recommendations impracticable. We could not have worked them. It would have involved, among other things, looking back over a period of 17 years and seeking definite evidence whether a person was self-employed for the whole of a tax year 15, 16, 17 years ago, with a good deal of money dependent upon the result. That seemed to us to be getting well beyond the range of practicability.
We have devised this, as we think, much better and much simpler scheme, where there will be no dubiety, and where people will know exactly where they are. I hope that this improvement which has been made by my right hon. Friend will bring legitimate satisfaction to many people who can take advantage of it.
The hon. and learned Member asked about the cost of Part II. If the hon. and learned Member addresses his mind to it he will see that any extra cost loaded on by Part II is bound to dwindle to nothing in 30 years' time because the only people who can take advantage of Part II are those who are over the age of 40. He criticised me for a moment for speaking in terms of ages rather than years. I was doing that for simplicity's sake. I thought I made it clear in my speech that all this was by calendar years and not by age, but 30 years hence all those people will be over 70 and will no longer be within the range of this scheme which allows tax relief.
Therefore, there will be a tapering of the extra cost over those 30 years. I still stick to my statement that as soon as we have got the scheme running on a normal basis, in the first year of that character, the cost is likely to be 25 per cent. higher


than it would otherwise be by reason of the provision for the late entrants.

Schedule read a Second time and added to the Bill.

Bill reported, with Amendments; as amended (in Committee and on recommittal), considered.

New Clause.—(SETTLED PROPERTY PASSING ON DEATH OF HUSBAND AND WIFE.)

(1) In subsection (2) of section thirty-two of the Finance Act, 1954 (which relates to the exemption from estate duty of property passing on the death of a surviving spouse, when duty has been paid on the death of the other spouse or would have been if the duty were payable on estates of however small a principal value), for the words "but would have been if the duty were payable on estates of however small a principal value" there shall be substituted the words "by reason only of the property being or forming part of an estate of too small a principal value or of no principal value".
(2) This section shall apply where the second death occurs after the commencement of this Act, whether or not the first death occurred after that commencement.—[Sir E. Boyle.]

Brought up, and read the First time.

Sir E. Boyle: I beg to move, That the Clause be read a Second time.
This new Clause is in fulfilment of an undertaking given by the Solicitor-General during the discussion of a new Clause proposed in Committee by my hon. Friend the Member for Dover (Mr. Arbuthnot). During the discussion then the hon. and learned Member for Kettering (Mr. Mitchison) raised a matter which the Solicitor-General promised to look at before the next stage of the Bill.
Briefly, the point was this. The hon. and learned Member for Kettering asked how at any stage duty could be charged on an estate which appears to be a minus quantity. There is, of course, no duty payable on any insolvent estate. The new Clause is concerned with the case in which the estate of the first of two spouses to die is insolvent, but the estate of the surviving spouse is not insolvent.
To take a concrete example, let us suppose that a man has left debts of £20,000, his only estate being shares of £15,000 which he settles on his widow by his will. The estate is insolvent and, therefore, no duty is payable, but we will suppose that, subsequently, the shares appreciate to a value of £25,000. The debts are paid off and at the widow's

death the settled property consists of shares worth £5,000.
Under the law as it stands, the insolvency of the husband's estate involves a charge to duty on £5,000 on the widow's death, even though by reason of Section 32 (2) of the Finance Act, 1954, there would have been no such charge if the husband's estate had been not insolvent but below the exemption limit. All that the new Clause does is to assimilate the case in which the husband's estate is insolvent to the case in which it is solvent but too small to pay any duty.

Mr. Mitchison: I should like to congratulate the Economic Secretary on such a singlarly lucid exposition. I suppose that he is professionally so alive to the possibilities of inflation and share appreciation that he was able to understand and explain a point to which my imagination had not risen. The Clause as originally proposed and as now drafted meets an obvious omission or error in previous legislation and, on this side of the House, we have no objection whatsoever to it.

Clause read a Second time and added to the Bill.

New Clause.—(AMENDMENTS AS TO FRIENDLY SOCIETIES.)

(1) In determining for the purposes of the exemptions from tax conferred on registered friendly societies and registered trade unions by section four hundred and forty of the Income Tax Act, 1952, whether any such society or union is by Act of Parliament or by its rules precluded from assuring to any person a sum exceeding one hundred and four pounds a year by way of annuity, there shall be disregarded any annuities under contracts approved by the Commissioners of Inland Revenue under section twenty of this Act, being annuities payable wholly in return for premiums or other consideration paid by a person who (when the premiums or other consideration are or is payable) is, or would but for an insufficiency of profits or gains be, chargeable to tax in respect of relevant earnings (as defined in the said section twenty) from a trade, profession, vocation, office or employment carried on or held by him.

(2) If, in the event of a dissolution of any such society or union, any such annuity as aforesaid ceases to be paid, or any contract for the payment of such an annuity fails in whole or in part, no payment shall be made in respect thereof out of the funds of the society or union to the annuitant or other person entitled to the benefit of the contract, but any sum which, but for this provision, would have been paid to him shall be applied in purchasing for the benefit of the annuitant an annuity (for the like term, and subject to the like conditions


against surrender, commutation or assignment) from a person lawfully carrying on in the United Kingdom a business of granting annuities on human life.

(3) In the proviso to paragraph (1) of section eight and in subsection (1) of section forty-one of the Friendly Societies Act, 1896 (which restrict the benefits payable by a registered friendly society or branch by way of annuity), the word "annuity" shall be taken not to include any such annuities as are referred to in subsection (1) of this section; and, subject to the following subsection, where at the time when this section comes into force the rules of any registered friendly society or branch permit the society or branch to assure an annuity of one hundred and four pounds a year, the rules may within six months from that time be amended by resolution of the committee of management so as to permit the society or branch to assure additional amounts under such contracts as are so referred to.

(4) No amendment of the rules of a society or branch which is made by virtue of the last foregoing subsection shall extend to contracts entered into more than a year after the date when the amendment is registered under the Friendly Societies Act, 1896; and no such amendment shall be so registered unless the registrar to whom it is sent for registration is satisfied that the amendment (in addition to complying with the other conditions of this section)—

(a) could not, within the six months beginning with the date when this section comes into force, have been made in the manner authorised by the rules of the society or branch, or not without summoning a special meeting of the society or branch; and
(b) has been certified by any such actuary as is mentioned in section sixteen of the Friendly Societies Act, 1896, to be free from objection on actuarial grounds.—[Mr. H. Macmillan.]

Brought up, and read the First time.

Mr. H. Macmillan: I beg to move, That the Clause be read a Second time.
The purpose of the Clause is to enable registered friendly societies and trade unions to assure to their members retirement annuities of more than £104 per annum under contracts approved by the Commissioners of Inland Revenue under Clause 20. The point about friendly societies was drawn to my attention by my hon. Friend the Member for Southend, East (Mr. McAdden), who withdrew an Amendment on an undertaking that we would try to meet the point. The present law exempts from Income Tax the funds of registered friendly societies and the provident funds of trade unions on condition that they do not assure an annuity exceeding £104 or any gross sum exceeding £500. These limits are a condition of registration for friendly societies. They are part of the

basis of their system and not merely conditions of tax exemption.
Under Clause 22, assurance companies are to be exempt from tax in respect of funds referable to retirement annuities of the self-employed and under the conditions which we have just been discussing. There is, therefore, no reason that we can see in logic or equity why registered societies and trade unions should not be allowed to provide similar annuities to their members with this exemption. Subsection (1) of the new Clause makes the necessary amendment to the Income Tax Act, 1952, and the following subsections deal with points which may arise.
Subsection (2) deals with what happens in the event of the dissolution of a society or a union. Subsection (3) allows the committee of a society or trade union to make an amendment of the rules without waiting for the annual meeting or having to summon an expensive special meeting. This is a convenience which would help them. I commend the Clause to the House, because I think it equitable that these organisations should have the same position as insurance companies under the new schemes.

Mr. J. T. Price: I rise only because on an earlier Clause I felt constrained to speak rather critically of the Chancellor's proposal and therefore on this Clause am even more pleased than I should otherwise be to be able to thank the Chancellor for bringing this proposal forward, particularly as it links the trade unions with the friendly societies. In handing over this small bouquet to the Chancellor, I should like to mention that the trade unions, alongside the friendly societies, have for many years administered provident benfits to the members of those organisations, generally in a very efficient and satisfactory manner. A stage has been reached in our social development when I should imagine that many of the trade unions, with the technical equipment and the highly efficient organisations which they have built up, will find it worthwhile at least considering whether or not they should enter this new sphere of providing benefits for those members who have not been otherwise given pension rights in their conditions of employment in various industries.
It would not be out of place, perhaps, in any reference to the wider matters if I said that I think this House would probably deplore any development, either in friendly societies or in trade union adminitration, which meant their going into the annuity business, a highly technical matter, without proper actuarial advice. I hope there will be no repetition of the kind of experience which some organisations have suffered in years gone by, of schemes being put forward with high hopes but without the necessary technical advice behind them.
With those remarks, I thank the Chancellor for bringing the trade unions and the friendly societies into line with the facilities now open to the insurance offices. I hope the scheme will be administered not only with a view to the sectional interests of any of these organisations but to the wider interests of the social welfare of the citizens of this country.

8.30 p.m.

Mr. Stephen McAdden: If I am brief in expressing my thanks to the Chancellor for the ample way in which he has met the representations I made on this matter during the Committee stage of the Bill, it is only because I realise that the best thanks we can afford the Minister on this Measure is to assist him to get the Finance Bill through with the greatest possible speed.
My thanks are none the less sincere because the Chancellor has done the most enlightened thing in this matter. He has gone as far as he could to meet the wishes of the friendly societies, he has shown that he believes they have a just and proved case, and he has gone all the way to ensure that they are able to compete upon equal terms with the large companies in this new method of saving, upon which my right hon. Friend himself has embarked, and upon which I am sure all hon. Members wish him every success. I thank him sincerely for what he has done in this matter.

Mr. Mitchison: On this side of the Committee we welcome, as we welcomed at an earlier stage, the concession made to the friendly societies. I should like to take a small coal of fire and deposit it upon the devoted head of the Chancellor by reminding the right hon. Gentleman that it was I who pointed out that the right hon. Gentleman had forgotten

the trade unions, and the coal of fire is now to thank him for having ransacked his memory to discover somewhere in the depths of it some recollection that such institutions exist. The friendly society activities—if I may so describe them—of trade unions for these purposes are very close to those of the friendly societies. They are actually in the same Section of the 1952 Act. The right hon. Gentleman must have stopped reading it a little too early; but the Income Act is rather tedious reading. At any rate, I am glad that they have been included.
I make one other comment which, I hope, will be corrected if I am wrong. I have been looking at the time provisions in subsection (4). They restrict the period during which the rules of a society or branch may be amended, "by virtue of the last foregoing subsection"—that is, by virtue of subsection (3). There is another similar restriction under paragraph (a) of that subsection.
I gathered from what the right hon. Gentleman said that the object of those time provisions was simply to limit the operation of Amendments made under the special facilities given under subsection (3); that is to say, otherwise than in ordinary accord with the rules of the registered friendly society or branch; and that therefore the time provisions relate only to cases where the Amendments have been made by the committee of management itself. If that is so, that seems to be a thoroughly reasonable provision, and I suppose it will impose on the society or branch the practical duty of taking up the matter again at the next regular opportunity and repeating what was done by the committee of management the first time.

Mr. H. Macmillan: indicated assent.

Mr. Mitchison: I am glad to see the right hon. Gentleman nodding. We had the following Amendments down to this new Clause—in line 33, leave out from "shall" to "registered" in line 34 and insert "be"; in line 35, leave out from "1896" to "unless", and in line 38, leave out paragraph (a). They have not been called, and I shall not refer to them in detail. We put them down because we were not certain about that point, and I am glad to hear that all is well.
I make one more short comment. I believe that there have been alterations


in this limit before, although I speak from memory. I appreciate that the time has arrived for an increase. What has been done here—I am sure it will reassure hon. Gentlemen opposite—is in this case at any rate to take off the limit altogether. The sky is the limit this time. Icaros, was it not, who flew up there rather too rashly and got into trouble? My right hon. Friend was right in saying, "Now that you are no longer restrained within the limit of £104 annuity, do not fly too quickly lest you fly into the sun." All that is true but, after all, times have changed and certainly the trade unions concerned in this matter, and I believe, too, the friendly societies concerned in it, may under modern, conditions, and with no horrible shortage of actuaries and accountants, be relied upon to set their own limits in the light of prudence rather than in the light of Acts of Parliament. Therefore my hon. Friends and I welcome this Clause.

Clause read a Second time and added to the Bill.

New Clause.—(COMPOSITION FOR STAMP DUTY ON CHEQUES, &C.)

(1) The Commissioners may enter into an agreement with any banker for the composition, in accordance with the following provisions of this section, of the stamp duty chargeable under the heading "Bill of Exchange payable on demand" in the First Schedule to the Stamp Act, 1891, on such instruments—

(a) drawn on the banker by his customers on forms supplied by him, or
(b) drawn by the banker on himself or another banker,

as may be specified in the agreement.

(2) Any such agreement shall require the banker to deliver to the Commissioners periodical accounts in respect of the instruments to which the agreement relates giving particulars—

(a) of forms supplied by him to his customers with a view to their being completed and issued as such instruments by the customers, and of forms so supplied but returned unused or spoilt, and
(b) of such instruments issued by him,

and may contain such other terms and conditions as the Commissioners think proper.

(3) Where any such agreement has been made with a banker, any instrument to which the agreement relates and which bears such indication of the payment of stamp duty as the Commissioners may require shall not be chargeable with stamp duty, but the banker shall pay to the Commissioners, on the delivery

of any account under the agreement, such sums as would but for the provisions of this section have been chargeable by way of stamp duty on such instruments issued during the period to which the account relates, it being assumed for this purpose that the number of such instruments issued by his customers was equal to the number of forms supplied less the number of forms returned as mentioned in paragraph (a) of the last foregoing subsection.

(4) Where a banker makes default in delivering any account required by any such agreement or in paying the duty payable on the delivery of any such account, he shall be liable to a fine not exceeding fifty pounds for any day during which the default continues and shall also be liable to pay to Her Majesty, in addition to the duty, interest thereon at the rate of five per cent. per annum from the date when the default begins.—[Mr. H. Macmillan.]

Brought up and read the First time.

Mr. H. Macmillan: I beg to move, That the Clause be read a Second time.
The object of the Clause is to make a reform, minor in a sense but not without importance. It is to enable the Commissioners of Inland Revenue to enter into agreements with the banks with the object of improving the present method of collecting Stamp Duty on cheques and dividend warrants.
Under the present law, the 2d. Stamp Duty on cheques, dividend warrants, and so forth, has to be denoted by an impressed, or sometimes an adhesive, stamp. Under the proposed agreements, the banks' printers will print on the cheques a medallion stating that the Stamp Duty has been or will be paid, and the banks will account to the Revenue for the duty payable on the cheques which they supply to their customers or use themselves.
Schemes on this basis are in operation in Australia, New Zealand and South Africa. There will be a substantial saving of work. It is a much simpler system to operate and will mean smaller staffs. Although there will be a period of slight slowing down in respect of the banks accounting to the Revenue for the duty, I think the reform is one that we ought to make, because it brings the whole system into line with modern methods of operation.

Mr. Mitchison: I thank the right hon. Gentleman and his right hon. Friend the Financial Secretary for having been kind enough to send my right hon. Friend a note about the practical reasons for the


Clause. I can only say that they seem to us to be good reasons.
We hope that the right hon. Gentleman will have a nice medallion to state that Stamp Duty has been or will be paid and will not use it for propaganda of any sort. I do not think that he ought to take this opportunity at any rate of advertising Premium Bonds, and there will not be much room unless it is a very large medallion.
Subject to points of that nature, we agree that this is an improvement, and that it will avoid the horrible picture in his letter of about 600 million cheques a year having to be transported to the Stamp Office. It sounds a bit funny, but it obviously represents a very great deal of unnecessary work. Our go-ahead cousins "down-under" have tumbled to it, and it is about time we did the same.

Mr. Bottomley: Can the Chancellor tell us on what basis the penalties have been fixed? Are they in accordance with the practice in Commonwealth countries, or in accordance with another similar matter in the United Kingdom?

Mr. H. Macmillan: The penalties follow what has been provided under analogous, although not exactly similar, schemes. I think they are reasonable. I do not think there will be very much difficulty about it. We cannot, of course, operate the scheme except with a very limited number of people. Business firms sometimes ask whether they can operate something of the same kind, but that is not possible. We shall operate it with the clearing banks. Although we have to put in a penalty, I do not think there will be very much likelihood of our having difficulty.

Clause read a Second time and added to the Bill.

New Clause.—(FURTHER CONTINUATION OF MILLS, FACTORIES ALLOWANCES.)

(1) The Income Tax Acts shall have effect, and be deemed always to have had effect, as if in subsection (2) of section seven of the Income Tax Act, 1945 (which provides that the allowances under section fifteen of the Finance Act, 1937, in respect of mills, factories and other similar premises shall cease in all cases after the year 1955–56), for the words "the next nine years of assessment" there had in both places been substituted the words "the next twelve years of assessment".

(2) The reference in this section to section seven of the Income Tax Act, 1945 shall be construed as referring to that section as set out in Part I of the Eleventh Schedule to the Income Tax Act, 1952.—[Sir E. Boyle.]

Brought up and read the First time.

Sir E. Boyle: I beg to move, That the Clause be read a Second time.
The object of the Clause is to implement the decision of my right hon. Friend that the mills and factories' allowance should be continued for a further, and final, period of three years. I think that, without discourtesy to the House, I can be brief in moving the Clause.
The allowance was extended by the former Chancellor, Sir Stafford Cripps, in 1950 for a further period of five years, and it was designed to end on 5th April, 1956. A new Clause designed to continue the allowance for a further five years was moved in Committee by my hon. Friend the Member for Dover (Mr. Arbuthnot), and I then said that I was instructed to say that we would look into this allowance and see whether there was a case for a further extension. My right hon. Friend has examined this question, and he thinks that in present circumstances there is a case for an absolutely final extension of three years. It is for that reason that this new Clause has been tabled.

Mr. Mitchison: On the whole, we regard the principle of this new Clause as reasonable. I need not go into it again, because it was discussed at an earlier stage. What was originally suggested, I believe, was the next 15 years instead of the next nine years, and the Treasury, which really at times becomes almost understandable, performed the operation known to the vulgar as splitting the difference, and this appears to be the result. In that spirit, and recognising that noble minds occasionally do quite ordinary things, we offer no objection whatever to this provision.

Mr. Stevens: I rise on behalf of my hon. Friend the Member for Dover (Mr. Arbuthnot), who cannot be here, once again to thank my hon. Friend the Economic Secretary and my right hon. Friend the Chancellor for rather more than splitting the difference in this new Clause. Originally, my hon. Friend asked for five years, and we have got three years, which is three-fifths of what


we want, or rather more than 50 per cent. Actually, it is 60 per cent. In any case, I am very grateful and offer my sincere thanks.

Clause read a second time and added to the Bill.

New Clause.—(ADDITIONAL EARNED INCOME RELIEF IN CERTAIN CASES.)

(1) In relation to a claimant to whom this section applies subsection (1) of section two hundred and eleven of the Income Tax Act, 1952 (which subsection provides earned income relief), as amended, shall have effect with the substitution for references to two-ninths and to four hundred and fifty pounds of references to one-quarter and to five hundred pounds.

(2) This section applies to a claimant whose earned income is chargeable to tax under Schedule E or who, if his earned income is chargeable to tax under Case II of Schedule D or partly under that case and otherwise under Schedule E, makes an election under the next following subsection.

(3) For the purposes of this section a claimant may elect to have his earned income, if or in so far as it is chargeable under Case II of Schedule D, computed under Schedule E, so that Rule 7 of the rules applicable to Schedule E and appearing in the Ninth Schedule to that Act shall apply accordingly:

Provided that any additional liability to tax imposed on a claimant by reason of such an election shall not in any case exceed the additional relief allowed to that claimant by virtue of subsection (1) of this section.—[Mr. Roy Jenkins.]

Brought up, and read the First time.

Mr. Roy Jenkins: I beg to move, That the Clause be read a Second time.
This Clause is an attempt to introduce into our Income Tax law the small beginnings of a new principle. The principle is broadly in line with one of the recommendations of the minority report of the Royal Commission on Taxation of Profits and Income, though the problem to which the Clause seeks to draw attention was recognised not only by the minority but also by the majority of that Royal Commission.
The problem is this. There is at the present time a sharp difference, and a consequent unfairness, between the treatment of expenses which are allowed by the Revenue to be deducted by taxpayers who happen to be assessed under Schedule D and those who happen to be assessed under Schedule E. I very much doubt if any hon. Member in the House would seek to dispute the fact that there is a difference and an unfairness in the treat-

ment of these two classes at the present time. The unfairness arises from the fact that those who are assessed under Schedule E as carrying on an office or employment can have expenses allowed only if they are "wholly, exclusively and necessarily" incurred in order to carry on that office or employment, whereas those who carry on a trade, profession or vocation and are assessed under Schedule D are enabled to deduct expenses from their taxable income provided that they are "wholly and exclusively" incurred.
The difference is an extremely important difference, because in the one case the word "necessarily" applies and in the other case it does not apply. This comparatively small difference in words without doubt makes a very great difference in treatment in practice. Those carrying on a trade or vocation and assessed under Schedule D are in any case in a very much more favourable position, in that they have, by capital allowances and other means, a possibility of safeguarding against the wearing out of the equipment which they use in earning the income, whereas that is not available to someone operating under Schedule E and carrying on an ordinary job.
8.45 p.m.
On top of that there is the difference to which I want primarily to call attention. It is the question of whether expenses are "necessarily" incurred. Without doubt, a great number of expenses which are allowed by the Revenue under Schedule D are not necessarily incurred in the sense that if they were not incurred in the year in question, it would not be possible in that year to earn the income on which the tax is levied. It may be argued that a great part of advertising and business expenses is not necessary even to earn future profits, but without any question at all a great part of expenditure of this type is devoted to the earning of future and not current profits against which the expenditure is offset.
On the other hand, one knows perfectly well that anyone operating under Schedule E is certainly not allowed to charge as expenses some item of expenditure which he incurs with a view to increasing his future earning capacity. Certainly, someone assessed under Schedule E would not be able to take a future employer to lunch and charge that as expenses on the


ground that if he got on well with the employer he might get a better job and have a greater earning capacity as a result.
It cannot be disputed that there is a great difference of treatment between someone assessed under Schedule D—he might be a businessman, someone carrying on a professional occupation, or one of a wide variety of vocations who can charge anything which is "wholly and exclusively" incurred—and someone charged under Schedule E who has to prove that it is "necessarily" incurred and is restricted in other ways in which the other persons are not restricted.
The existence of this problem was recognised by all members of the Royal Commission on the Taxation of Profits and Income, but the two sides differed in the method by which they sought to meet it. The majority—I think wrongly, and I will indicate why in a moment—thought that the best thing to do was to widen the position of Schedule E taxpayers and to put them in a position approximately the same as that which Schedule D taxpayers already enjoyed. I think that that is a mistaken approach to the problem, because it would have opened wide avenues for further tax avoidance which we very much want to avoid.
As a slight variant of that point, I think that it was mistaken even more strongly because we want to do nothing at present to narrow the tax base. Some of my right hon. and hon. Friends and I have tried to argue at an earlier stage that one of the disadvantages in our present tax structure is that we have a very high pyramid of tax rates constructed on a rather narrow basis of taxable income, in other words, that a great part of what is in fact income is excluded from the tax base and that as a result we have rates of tax which are nominally extremely high and which may bear extremely hardly on people who happen to be in the position that all their income constitutes part of the tax base, but bear less hardly on other people, a large part of whose income is outside the tax base. Thus it is undesirable to approach the problem by any further whittling away of the tax base.
In this new Clause we have attempted to adopt in a slightly modified form, not

the proposal of the majority of the Royal Commission for opening up the amount of expenses which may be charged for Schedule E taxpayers, but that put forward by the minority. That is to recognise that there is a real difference and that it is a cause of unfairness and grievance. We have attempted to solve it not by allowing any more expenses to be charged by anybody, but saying to the Schedule E taxpayer, "You are in an unfair position and we will recognise that by giving you an additional earned income allowance which will not be available to the Schedule D taxpayer who is much more fortunately placed from the point of view of expenses."
The Clause increases the earned income allowance for Schedule E taxpayers from two-ninths to one-quarter. In a sense this is a token increase. In moving the Clause my hon. Friends and I are seeking to establish the principle that unfairness exists in the treatment accorded to taxpayers assessed under the two Schedules, and we submit that this proposal is, broadly, the correct method of remedying that unfairness. We are not specially concerned about the difference between two-ninths and one-quarter.
The Clause goes a little further in this direction by saying that taxpayers who happen to be assessed under Schedule D—the lucky ones from the point of view of expenses—can, if they so choose, receive the benefit of this extra earned income relief by allowing themselves voluntarily to be assessed, for expenses purposes, not under Schedule D but under Schedule E. It is therefore possible for anyone, provided that he is willing to accept the present rigours of the Schedule E rule upon expenses, to receive the benfit of the extra earned income allowance.
This seems to me to be a reasonable and moderate approach to a problem the reality of which cannot be denied by any hon. Member. There is unfairness here, which is leading to a sharp sense of grievance. I do not think we need fear that the institution of a new principle will be specially dangerous. After all, we already have the earned income allowance itself. As I understand it, that allowance was introduced into our taxation law about 45 years ago, not because Chancellors then thought that there was any particular moral difference between earned and unearned income, but because


they thought that those with earned incomes were in a less favourable position than those with unearned incomes. They took the view that unless something went wrong those with unearned incomes received them indefinitely, and there was no question of a cessation of income at retirement, or of their having to make provision for the fact that their earning capacities were wearing out.
The earned income allowance is designed to deal in a rough and ready way with an unfairness inherent in two types of income, nad the differential between the earned income allowance of one type of taxpayer under Schedule D and another under Schedule E would be a logical extension of this principle and would go some little way towards making our taxation system more fair that it is at present. I believe that it would also remove a real sense of grievance which exists in the minds of many taxpayers.

Mr. Austen Albu: I beg to second the Motion.
It is perhaps a little unfortunate that we should be discussing this important principle in a rather empty House, because it deals with the considerable disadvantages suffered by many professional people in salaried occupations—and the number of professional people in salaried occupations is growing every year. These professional people—whether they be lawyers, engineers, or accountants—suffer by comparison with their fellows who are self-employed, as I hope to show very briefly.
We on this side of the Committee make no excuse for advocating measures which are to the advantage of earned incomes as against unearned incomes, and certainly this Clause would be of assistance to those whose incomes are derived mainly from work. To that extent it is in line with the views expressed recently in the Press, and even to some extent accepted by hon. Members on this side of the Committee during the course of the discussions on this Bill, that there is a need for a greater incentive to be given to the professional and technical classes.
If I may give an example of the sort of persons who would benefit by this new Clause, I cannot do better than refer to an Amendment I moved on the last

occasion on which it was possible to move Amendments of this sort to this Bill. It related to the position of the professional civil servant who very often finds that he cannot attain his position in the Civil Service unless he is a member of a professional association. Advertisements for engineers, scientists, accountants, and so forth, all ask that applicants shall hold the qualification of a professional association as, for instance, the Institution of Mechanical Engineers.
Once a man becomes a professional civil servant the Treasury is unwilling to say that it is necessarily part of the conditions of his employment that he should continue to be a member. This is a ludicrous situation. It means that the man is unable to obtain relief for his subscriptions to those professional bodies which are now quite high, and equally he is unable to obtain relief for the professional books which he needs in the course of his duty. It cannot be of any advantage to the State for a professional man, a technical man or a scientist, not to continue to be a member of an association established for the purpose of furthering science, or the particular technique of his profession.
But the Treasury makes it more difficult for him to be so. Were he self-employed, he would be fully entitled to claim under Schedule D rules for all the expenses he incurs in maintaining membership of a professional association and in continuing to do those things which he has to do in order to advance his knowledge. The Amendment was negatived on the last occasion when it was moved, and it has been moved on a number of occasions. It must be a great disadvantage that in a period of rapidly changing ideas, particularly technical and scientific ideas, we should not give to the professional man the relief which he should have if he is to maintain his knowledge of his profession and keep up to date with new ideas.
There may well be administrative difficulties—as I am sure was argued from the Treasury Bench on the last occasion when the matter was discussed—about applying this form of relief. There are only two ways to deal with it. One way, as has been said by my hon. Friend, is by accepting the proposal of the majority of the Royal Commission, and giving almost the same reliefs to those who


obtain relief under Schedule E as are now obtained by those who get them under Schedule D. The other way is that recommended in the minority report, which is roughly along the lines of the new Clause moved by my hon. Friend.
Hon. Members on this side of the Committee are opposed to widening the whole range of expenses as relief from taxation, for the good reasons which have been advanced during the debates on this Bill. We think that already the tax base is too narrow and, therefore, the burden of taxation on the majority of people falls heavier than otherwise it would do. But there is a very good case for accepting this. After all, it is not a very great change in the law, and at least it would give as much advantage to the professional man in salaried employment as would be required to bring him into something like a position equivalent to that enjoyed at present by those who are self-employed.
9.0 p.m.
In order to make everything fair and to put everybody on an equal basis, we have the third subsection of the Clause, which would enable a person in self-employment, who gets relief under Schedule D, to make the choice for himself which form of relief he wishes to have. It cannot be said, therefore, that we propose to reverse the present disadvantages, placing them on the Schedule D man instead of the Schedule E man. We are giving the Schedule D man an opportunity to have exactly the same conditions as the professional man paying tax under Schedule E and in salaried employment.
The new Clause would undoubtedly give a great deal of pleasure to a large number of very worthy professional persons who are in salaried employment. The present situation, as I said when I last spoke on the subject, is ludicrous. When I was in salaried employment, not in the Civil Service, all that was necessary was for me to get my employer to give me a note saying that for the purpose of my employment it was necessary that I should be a member of the Institution of Mechanical Engineers; and I was given Income Tax relief on the four or five guineas which I paid in subscription, without any question by the Income Tax authorities. If I had been a civil servant,

the Treasury would not have given me that statement and I should not have been given the relief. The situation is ludicrous, and the best way to deal with it is that which was so well described by my hon. Friend the Member for Stechford in moving the new Clause.

Captain J. A. L. Duncan: I do not pretend to be an expert on this subject, but the fact that the hon. Member for Stechford (Mr. Roy Jenkins) has moved the new Clause and talked about unfairness gives me the chance to say something about one section of the community with whom I am in fairly close touch. I am a member of the Royal College of Veterinary Surgeons and that body has brought to my notice the fact that there is unfairness in dealing with this matter. I hope the Treasury will look into the whole question with a view to dealing with that unfairness in the next Finance Bill, if they can do nothing about it in this Bill.
The veterinary profession and the dental profession are both looked after by statutory bodies, and members of the profession have to pay a fee every year, before they are allowed to practise, in order to get the necessary letters after their names. That fee, whatever it may be—four, five or six guineas—is not allowed as an expense by the Income Tax authorities, on the ground that it is a condition precedent to practise and not an expense, wholly, necessarily and exclusively incurred in the course of their practice. I believe that the case has been tested in the courts and that the decision of the Income Tax authorities has been upheld by the courts.
It seems to me quite stupid that the Commissioners of Inland Revenue should be allowed to get away with this absurd position. I have referred to veterinary surgeons and dentists, but there are probably many others affected; and the hon. Member for Edmonton (Mr. Albu) has mentioned people in similar categories. In these matters some people get away with it and others do not. It seems to me that something must be done, one way or the other, to put this matter right and to eliminate the unfairness. I am really not qualified to enter into the high financial argument as to whether——

Mr. Albu: I am not sure whether the hon. and gallant Gentleman is referring


to the veterinary surgeons whose membership of the Royal College of Veterinary Surgeons is a statutory one, and who cannot practise otherwise. If that is the case, they are entitled.

Captain Duncan: No, they are not entitled, and the reason is, as I have already said, that the Income Tax authorities take the view that their subscription is a condition precedent to practise rather than a part of expenses wholly, necessarily and exclusively incurred in the course of that profession.
I am not prepared to dogmatise as to which is the right way to deal with it. I would only say to the hon. Member for Stechford that although I agree that the tax basis is narrow I do not think that, in order to eliminate an unfairness like this, it would be wrong to narrow it still further. What I think is wrong is that the whole weight of taxation is far too heavy on us all, and the answer that I would give to the hon. Member's new Clause, and the method of dealing with this unfairness, is not to narrow the basis of taxation but to lessen its weight.

Mr. H. Brooke: My hon, and gallant Friend the Member for South Angus (Captain Duncan) has skilfully used this new Clause as an opportunity to express certain views to Parliament about the Schedule E law. That is a matter on which the Royal Commission made certain recommendations. My right hon. Friend the Chancellor did not think fit to bring in proposals arising out of those recommendations, at any rate this year.
I confess that I was somewhat puzzled by the speech of the hon. Member for Edmonton (Mr. Albu). Having first of all criticised the restrictive character of the Schedule E tax relief for expenses, he proceeded to second this new Clause which would apply the Schedule E rules to an increased number of people. But I will seek to address myself to the main point of the Clause, which was moved by the hon. Member for Stechford (Mr. Roy Jenkins).
If I understood him rightly, the hon. Member said that he was moving this new Clause as a demonstration or a gesture rather than tightly binding himself to any of these proposals. That may explain why he was departing from what hitherto has been the general custom in this field,

which is that the age relief fraction should move along with the earned income relief. He would certainly be departing from precedent if he succeeded in getting this new Clause on the Statute Book, because it would give the one-quarter relief for earned income instead of two-ninths but would not extend that advantage either to the general age relief for people over 65 or to the small income relief for people with incomes under £300 a year, although, hitherto, it has been thought fit, and I am sure rightly, that the two fractions—or perhaps I should say the three fractions—should go together.
The hon. Gentleman indicated that he was basing this Clause on the idea in the minority report of the Royal Commission, although he was not following it slavishly. The present position is that the earned income relief at the two-ninths rate is the highest figure at which the relief had ever stood. When this earned income relief was introduced 36 years ago following the recommendation of an earlier Royal Commission, the rate was fixed at one-tenth. It was gradually extended beyond that up to the time of the war; there was a cut in 1940, and there have been extensions since the war. It was raised to two-ninths in 1952.
This new Clause proposes that it should be extended to one-quarter for those people who come under Schedule E, and for those people who are chargeable under Case II of Schedule D if they opt for the restrictive Schedule E expenses rule rather than the wider Schedule D expenses rule.
The minority report of the Royal Commission was, of course, in some respects somewhat bolder. It recommended that earned income relief should be available to all Schedule E incomes without any upper limit at all—a most interesting and far-reaching recommendation—and then recommended, somewhat in line with this Clause, that a similar extension of relief should be given to individuals assessed in respect of professional earnings under Case II of Schedule D but who, as the Clause says, opt to be assessed on their profits by reference to the Schedule E expenses rule. It made a further recommendation relating to the case of trading and business profits of individuals and partnerships.
The hon. Member for Stechford has made a selection out of these recommendations, and I think that his main purpose has been to bring before the House the difference between the Schedule D and the Schedule E expenses rules, a matter which might also have come up on a later Clause which, I understand, is not likely to be called. In his speech, there seemed to me to be a hint that the rules for Schedule D are operated as a kind of special relief favourable to the Schedule D taxpayer. That, of course, is not the purpose of them. The purpose of the difference is to seek to reflect the essential feature of the separate cases.

Mr. Roy Jenkins: Does the right hon. Gentleman not consider that it is sometimes more important to have regard to results rather than purposes?

Mr. Brooke: I did not interrupt the hon. Gentleman's speech, and I hope he will allow me to refer here to the purposes.
The essential feature of the two cases is that the Schedule D taxpayer has to incur a variety of expenses in the course of earning his profit and for the purpose of earning his profit, whereas the Schedule E taxpayer is entitled only to deduct the expenses which are necessarily incurred at the behest of an employer in the performance of the duties of his office or employment.
Let me say at once that I recognise the particular position of those people who are taxed under Schedule E but who have not, in the ordinary sense, an employer. The clergy is one example. If anybody wishes to take the point up with the Financial Secretary, let me say at once that when I sat on the other side of the House I myself moved a new Clause designed to give the clergy, who have not in the ordinary sense got an employer, something akin to the Schedule D rather than the Schedule E expenses rule. Certain right hon. Gentlemen opposite explained why that was quite unthinkable, and I remember that we went to a Division about it. I quote that, first, so as to be entirely frank with the House, and, second, to show that I, for one, certainly have not got a closed mind on these subjects.
9.15 p.m.
I must address myself to the proposal in the new Clause. It is a proposal that the law shall be altered in a way that in certain circumstances will give earned income relief at the rate of one-quarter instead of two-ninths. If all the Schedule D people referred to in the Clause decided to take advantage of it and claim relief at one-quarter, while subjecting themselves to the more rigid Schedule E expenses rule—and it seems to me quite a reasonable assumption that they would—the cost to the revenue would be £72 million in a full year.
I must say quite frankly that, from the context of the present Budget, it would be unthinkable for my right hon. Friend the Chancellor to accept an erosion of that magnitude into his Budget surplus.

Mr. Roy Jenkins: I am interested in the means by which the right hon. Gentleman has arrived at the figure of £72 million. He must clearly have made some offsetting assumption for the fact that Schedule D taxpayers who took this option would have to forgo expenses which they might otherwise have claimed and that to that extent their taxable income would be greater, even though they would have a bigger earned income relief to set off against it. Can the right hon. Gentleman take us through his calculations on that point?

Mr. Brooke: I do not think I could give the precise calculation of gains and losses. I think the hon. Member will accept it from me that there is bound to be a certain element of assumption in any such calculations, but so far as we can arrive at a figure this would cause a loss of revenue of about £72 million.

Mr. Jay: Can the right hon. Gentleman say whether, in arriving at that precise figure, he has in principle taken into account the offset by the increase in the size of the taxable income, to which my hon. Friend the Member for Stechford (Mr. Roy Jenkins) has referred?

Mr. Brooke: I am not suggesting that £72 million is a gross figure. I was giving it as a net figure.
When I have given that figure—and it is the best estimate we can make—I rather hope that the hon. Member for Stechford, having made his demonstration and his gesture, will appreciate that his


Clause is not one which in present circumstances the Chancellor of the Exchequer could possibly accept.

Mr. Jay: Although the Financial Secretary says that he does not have a closed mind, I am not greatly surprised that he has not accepted the Clause. As I think he realises, what we are really concerned with is not the age relief or the exact size of the earned income relief, or, indeed, the option, of which the right hon. Gentleman made a great deal, for the Schedule D taxpayer to move in certain circumstances on to the Schedule E basis. What we are concerned with, as is the hon. and gallant Member for South Angus (Captain Duncan), is the basic unfairness which exists between the Schedule D and Schedule E methods of treating expenses. If I say a few more words, it is only to try to persuade the Financial Secretary to think very hard about this, if not tonight, at least before the next time the Chancellor deals with these problems.
The difficulty arises from the distinction between the words "wholly and exclusively" under Schedule D and "wholly and exclusively and necessary" under Schedule E. These sacred words go back for over one hundred years and they are very deeply embedded in the Inland Revenue system.
The Financial Secretary gave what he called the purpose of the present distinction—the theory, so to speak, which has been operating for all this time—but we are more concerned with the actual results and the actual practice of granting these reliefs for expenses as they work out. My hon. Friend the Member for Edmonton (Mr. Albu) gave the very familiar example of professional subscriptions, and so on, which the Schedule D taxpayer is able to make, as compared with the refusal of those deductions, for instance, to the civil servant or other worker, such as the clergyman an hon. Gentleman opposite mentioned, working under Schedule E.
It works in even more extraordinary ways. One of the oddest anomalies of all is that in no case, or practically no case, can a trade union subscription be claimed as a deduction, even though it is a condition of employment in practice. My hon. Friend the Member for Edmon-

ton said he had been able with some Schedule E activity or other to get a deduction as the result of the employer's signing a piece of paper to that effect. Nevertheless, even where the trade union subscription is a necessary condition of employment, it is not allowed by the Inland Revenue.

Mr. J. T. Price: I agree with my right hon. Friend's argument, but, for the sake of exactitude and the record, perhaps he will allow me to point out there is an exception. It ought to be said that if a trade union administers friendly society benefits, that portion of the subscription which is related to those benefits is allowed for deduction.

Mr. Jay: My hon. Friend is right, and that is why I said in almost every case. In the normal case it is the curious fact that the subscription paid by a firm to a trade association is a deductible expense, while the subscription paid by a worker to a trade union is not.
It happens, quite rightly and naturally, that when we have a General Election the Trades Union Congress, on the one side, puts out political manifestoes supporting one party and the Federation of British Industries, on the other side, puts out manifestos supporting the other party. It is always curious to reflect that the cost of that activity on one side is apparently paid for by the Exchequer while that on the other is paid for by the trade union contributions of the employees. One could give further examples of this curious distinction that exists.
The question before the House is what can be done to remedy that. I think most of us have been really troubled by this when thinking about Income Tax and trying to find some possible solution. I think there are three possible ways out of the difficulty. One is to accept the proposal of the majority of the Royal Commission that we should introduce the latitude of Schedule D into Schedule E. I agree with my hon. Friend the Member for Stechford (Mr. Roy Jenkins) that that would be, as he put it, narrowing the tax base even further. One may put it differently and say that it would be extending some of the present abuses in Schedule D to Schedule E. I do not think that most of us would wish to see that.
Logically, of course, the alternative would be to take exactly the opposite course and propose that the Inland


Revenue should apply to Schedule D, to the profit area of taxation, the same rigid limitations and to introduce the word "necessary" applied now to Schedule E. Many of us must have wondered at times whether that would not be the right solution. The difficulty is, I understand, that the Inland Revenue has always held it would, in practice, be impossible to administer a rule of that kind. Suppose it were the duty of the tax collector to say, in the case of a business, what was or was not a necessary expense, in disagreement with the manager of the business. It has always been held that that would be administratively impossible. I am impressed by the fact that even the minority of the Royal Commission, who were very anxious to solve this problem, were not prepared to make that proposal. We read that, in the case of Lady Docker's mink coat, apparently the Inland Revenue was not prepared to say that that was necessary for a particular business. We are glad to see that apparently it is willing to draw the line somewhere, but, nevertheless, there is no great body of opinion which is prepared to argue that that is the general solution.

That being so, it seemed to us worth putting forward an alternative way out of the difficulty. If we cannot bring Schedule D and Schedule E into line with one another in the matter of "wholly, exclusively and necessarily" the next best thing to do is to grant a special concession to Schedule E taxpayer by another method which will counteract the disadvantage which he is suffering under the expenses rule.

I think that the proposal put forward by my hon. Friends is simple. It may not be the completely ideal solution and I can well believe that it may be that the right hon. Gentleman cannot spare that amount of revenue at the moment—but it presents a possible avenue of escape from this difficulty. If my hon. Friends feel able to press this suggestion, I hope that they will do so as a reminder to the Financial Secretary that this problem has not yet been solved and that we believe that if he cannot find another solution himself he should think hard on these lines.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 179, Noes 227.

Messer, Sir F.
Proctor, W. T.
Thornton, E.


Mikardo, Ian
Pryde, D. J.
Timmons, J.


Mitchison, G. R.
Randall, H. E.
Tomney, F.


Moody, A. S.
Rankin, John
Ungoed-Thomas, Sir Lynn


Mort, D. L.
Redhead, E. C.
Wade, D. W.


Moss, R.
Reid, William
Warbey, W. N.


Mulley, F. W.
Roberts, Albert (Normanton)
Weitzman, D.


Noel-Baker, Francis (Swindon)
Roberts, Goronwy (Caernarvon)
Wells, Percy (Faversham)


Oliver, G. H.
Robinson, Kenneth (St. Pancras, N.)
Wells, William (Walsall, N.)


Oswald, T.
Rogers, George (Kensington, N.)
West, D. G.


Owen, W. J.
Shurmer, P. L. E.
Wheeldon, W. E.


Padley, W. E.
Silverman, Julius (Aston)
Wilkins, W. A.


Paget, R. T.
Silverman, Sydney (Nelson)
Williams, David (Neath)


Paling, Rt. Hon. W. (Dearne Valley)
Slater, J. (Sedgefield)
Williams, Rev. Llywelyn (Ab'tillery)


Palmer, A. M. F.
Soskice, Rt. Hon. Sir Frank
Williams, W. R. (Openshaw)


Pannell, Charles (Leeds, W.)
Sparks, J. A.
Willis, Eustace (Edinburgh, E.)


Pargiter, G. A.
Steele, T.
Winterbottom, Richard


Parker, J.
Strachey, Rt. Hon. J.
Woodburn, Rt. Hon. A.


Parkin, B. T.
Stross, Dr. Barnett (Stoke-on-Trent, C.)
Yates, V. (Ladywood)


Plummer, Sir Leslie
Summerskitl, Rt. Hon. E.
Zilliacus, K.


Popplewell, E.
Swingler, S. T.



Price, J. T. (Westhoughton)
Taylor, John (West Lothian)
TELLERS FOR THE AYES:


Price, Philips (Gloucestershire, W.)
Thomas lorwerth (Rhondda, W.)
Mr. Pearson and Mr. Simmons



Probert, A. R.
Thompson, George (Dundee, E.)





NOES


Agnew, Cmdr. P. G.
Donaldson, Cmdr. C. E. McA.
Jennings, J. C. (Burton)


Aitken, W. T.
Doughty, C. J. A.
Johnson, Eric (Blackley)


Allan, R. A. (Paddington, S.)
Drayson, G. B.
Johnson, Howard (Kemptown)


Alport, C. J. M.
du Cann, E. D. L.
Jones, Rt. Hon. Aubrey (Hall Green)


Amery, Julian (Preston, N.)
Duncan, Capt. J. A. L.
Joseph, Sir Keith


Anstruther-Gray, Major Sir William
Duthie, W. S.
Joynson-Hicks, Hon. Sir Lancelot


Armstrong, C. W.
Eden, J. B. (Bournemouth, West)
Kaberry, D.


Ashton, H.
Elliot, Rt. Hon. W. E.
Keegan, D.


Astor, Hon. J. J.
Emmet, Hon. Mrs. Evelyn
Kerby, Capt. H. B.


Atkins, H. E.
Errington, Sir Eric
Kerr, H. W.


Baldock, Lt.-Cmdr. J. M.
Fell, A.
Kimball, M.


Baldwin, A. E.
Fisher, Nigel
Kirk, P. M.


Balniel, Lord
Fleetwood-Hesketh, R. F.
Lagden, G. W.


Barber, Anthony
Fletcher-Cooke, C.
Lambert, Hon. G.


Barlow, Sir John
Foster, John
Lancaster, Col. C. G.


Barter, John
Freeth, D. K.
Langford-Holt, J. A.


Beamish, Maj. Tufton
Galbraith, Hon. T. G. D.
Leather, E. H. C.


Bell, Ronald (Bucks, S.)
George, J. C. (Pollok)
Leavey, J. A.


Bennett, F. M. (Torquay)
Gibson-Watt, D.
Leburn, W. G.


Bevins, J. R. (Toxteth)
Glover, D.
Legge-Bourke, Maj. E. A. H.


Bidgood, J. C.
Godber, J. B.
Legh, Hon. Peter (Petersfield)


Biggs-Davison, J. A.
Gomme-Duncan, Col. Sir Alan
Lindsay, Hon. James (Devon, N.)


Birch, Rt. Hon. Nigel
Gough, C. F. H.
Lindsay, Martin (Solihull)


Bishop, F. P.
Gower, H. R.
Linstead, Sir H. N.


Black, C. W.
Graham, Sir Fergus
Lloyd-George, Maj. Rt. Hon. G.


Body, R. F.
Grant, W. (Woodside)
Lucas, Sir Jocelyn (Portsmouth, S.)


Boothby, Sir Robert
Grant-Ferris, Wg Cdr. R. (Nantwich)
Lucas-Tooth, Sir Hugh


Bossom, Sir Alfred
Green, A.
Mackeson, Brig. Sir Harry


Boyd-Carpenter, Rt. Hon. J. A.
Harris, Frederic (Croydon. N. W.)
Mackie, J. H.(Galloway)


Boyle, Sir Edward
Harrison, Col. J. H. (Eye)
McLaughlin, Mrs. P.


Braine, B. R.
Harvey, Ian (Harrow, E.)
Maclay, Rt. Hon. John


Bromley-Davenport, Lt.-Col. W. H.
Harvey, John (Walthamstow, E.)
McLean, Neil (Inverness)


Brooke, Rt. Hon. Henry
Hay, John
MacLeod, John (Ross &amp; Cromarty)


Browne, J. Nixon (Craigton)
Heath, Rt. Hon. E. R. G.
Macmillan, Rt. Hn. Harold (Bromley)


Bryan, P.
Henderson, John (Cathcart)
Maddan, Martin


Buchan-Hepburn, Rt. Hon. P. G. T.
Hill, Rt. Hon. Charles (Luton)
Maitland, Cdr. J. F. W. (Horncastle)


Bullus, Wing Commander E. E.
Hill, Mrs. E. (Wythenshawe)
Maitland, Hon. Patrick (Lanark)


Burden, F. F. A.
Hill, John (S. Norfolk)
Manningham-Buller, Rt. Hn. Sir R.


Butcher, Sir Herbert
Hinchingbrooke, Viscount
Markham, Major Sir Frank


Campbell, Sir David
Hirst, Geoffrey
Marlowe, A. A. H.


Channon, H.
Holland-Martin, C. J.
Marshall, Douglas


Chichester-Clark, R.
Hornby, R. P.
Mathew, R.


Clarke, Brig. Terence (Portsmth, W.)
Hornsby-Smith, Miss M. P.
Maude, Angus 


Cole, Norman
Horsbrugh, Rt. Hon. Dame Florence
Mawby, R. L.


Conant, Maj. Sir Roger
Howard, Hon. Greville (St. Ives)
Maydon, Lt.-Comdr. S. L. C.


Cordeaux, Lt.-Col. J. K.
Howard, John (Test)
Medlicott, Sir Frank


Corfield, Capt. F. V.
Hudson, Sir Austin (Lewisham, N.)
Molson, Rt. Hon. Hugh


Craddock, Beresford (Spelthorne)
Hughes Hallett, Vice Admiral J.
Moore, Sir Thomas


Crouch, R. F.
Hughes-Young, M. H. C.
Nabarro, G. D. N.


Crowder, Sir John (Finchley)
Hulbert, Sir Norman
Nairn, D. L. S.


Cunningham, Knox
Hurd, A. R.
Neave, Airey


Currie, G. B. H.
Hutchison, Sir Ian Clark (E'b'gh, W.)
Nicholls, Harmar


Dance, J. C. G.
Hutchison, Sir James (Sootstoun)
Nicholson, Godfrey (Farnham)


Davidson, Viscountess
Hyde, Montgomery
Nicolson, N. (B'n'm'th, E. &amp; Chr'eh)


D'Avigdor-Goldsmid, Sir Henry
Iremonger, T. L.
Nield, Basil (Chester)


Deedes, W. F.
Irvine, Bryant Godman (Rye)
Oakshott, H. D.


Digby, Simon Wingfield
Jenkins, Robert (Dulwich)
Ormsby-Gore, Hon. W. D.

New Clause.—(MINIMUM EARNED INCOME RELIEF.)

In subsection (1) of section two hundred and eleven of the Income Tax Act, 1952 (which provides for earned income and old age reliefs), there shall be added after the word "rate" the words "on the greater of the two following amounts, that is to say, (a)" and at the end of the subsection the words "or (b) on one hundred and twenty pounds and, if the claimant is entitled to a deduction under paragraph (a) of subsection (1) of section two hundred and ten of this Act or to a deduction under section two hundred and twelve of this Act including a deduction consequent on apportionment under section two hundred and thirteen of this Act), also on two-sevenths of the amount, on which tax at the standard rate constitutes that deduction or those deductions."—[Mr. Mulley.]

Brought up, and read the First time.

Mr. Frederick Mulley: I beg to move, That the Clause be read a Second time.
If the Financial Secretary found the previous Clause rather expensive, I am rather afraid that that is the argument he will deploy against this one. However, in moving it I am fortified by the knowledge that the principle has been suggested by the majority and minority reports of the Royal Commission. The matter was dealt with in the second report of the Royal Commission. In moving the Clause, we are concerned chiefly with the principle and not necessarily with the arithmetical calculation.
The Clause is designed to introduce two new principles into the basis of the treatment of earned income for taxation purposes. First, we propose that there should be a minimum earned income relief. There is already a maximum earned income relief, and I do not see why there should not equally be a minimum. Secondly, we propose that there should be a differential minimum

according to the personal and family circumstances of the taxpayer. That is to say, instead of it being related solely to the amount of earned income, consideration should also be given to the marriage and child responsibilities of taxpayers.
We suggest a minimum of £120, which means in the case of single persons that those below an earned income level of £540 will benefit. I apologise to the House if I get my arithmetic wrong, as I probably shall in the examples which I propose to put before the House. I am sure the Financial Secretary will be only too glad to correct such errors as I may make.
The basis of the differential calculation is to take, in the case of a married person, two-sevenths of the personal allowance, which at the moment is £240, and, in the case of a married person with children, two-sevenths of the child allowances. In my calculation in the case of married men with two children, the classical example always used by Chancellors of the Exchequer, this would mean that the minimum would be £245. If my arithmetic is right, it means that the Clause is designed to help single persons with earned incomes of less than £540, married persons with no children with incomes of £760 and less, and married persons with two children with earned incomes below £1,100.
The purpose of the new Clause, and the reason which in my opinion motivated the Commission in making this suggestion, is that only by a method similar to this can we give relief to the lower ranges of income without also at the same time extending it to the upper ranges, where the case for the reduction is less well made out. I think it is now thoroughly appreciated by all parts of the House that


special consideration should be given to family taxpayers with large commitments resulting therefrom.
Already, the trend has been for personal allowances and children's allowances to be raised when Chancellors of the Exchequer have found themselves able to make some relief in the level of Income Tax, but we say that the flat rate itself is not always the appropriate way and is often not sufficient. Secondly, of course, the flat rates of personal and children's allowances cannot be increased without giving those at the top of the tax ranges more relief than those in the lower ranges, for whom perhaps such relief is primarily designed.
The House ought to recognise that it is not only a case of helping those in the lower tax-paying groups, but, within the same broad income group, the financial circumstances of persons whose families or households vary very much according to the particular stage of life which they may have reached. In the case of a single person, he probably reaches at the age of 21 his maximum gross income. When he marries, he may, if his wife is also working, have a very reasonable and stable financial basis, but as soon as the wife has to stop working as the result of the arrival of children, and on account of the mounting costs of maintaining and taking care of them, there is a dramatic change in the fortunes of that family. Again, later on, when the children leave school and begin to work, especially if they remain at home, the total family income goes up very substantially. Yet again, there is the most dramatic change of all when the wage-earner ceases work and has to rely on the very low level of the old-age pension.
I do not want to develop this theme in detail at this hour, but to make the point that in connecting the earned income relief with the particular family circumstances of the taxpayer, we are trying to meet not only the special problem of the lower income group ranges without giving even more money away to those who perhaps need it much less, but are also trying to deal with a special problem within one group of income because of the period of perhaps 20 years when people are bringing up a family.
I hope, therefore, that since this principle has at least been blessed by both the minority and the majority of the

Royal Commission, the Government will give us a reassuring answer tonight. I would stress that we have heard a lot from the Government about incentives. It is true, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) said earlier, the incentives seem to be directed mainly at the higher managerial and bigger income classes, but if the Government want, as I am sure they do, production to go up, they should think much more of directing their incentives to the range of people on the factory floor and in the various sections of industry who would benefit from the reduction in tax that would accrue if this new Clause were accepted.
I therefore hope that, for these reasons, the Government will say that they will accept the Clause, or, if they cannot accept the detailed proposals which we have set out in it, will approve the principle on which it is based.

Mr. Albu: I beg to second the Motion.

9.45 p.m.

Mr. H. Brooke: When the hon. Member for Sheffield, Park (Mr. Mulley) rose, I thought for a moment that he was about to expedite our proceedings by moving the next new Clause on small lotteries and gaming, in which I know he has a parliamentary interest. I was a little disappointed, despite the hon. Member's excellent speech, that this Clause was not moved by the right hon. Gentleman the Member for Battersea, North (Mr. Jay), because I thought that I detected in it the right hon. Gentleman's paternity. About 3½ years ago, an article over his signature appeared in the Daily Herald, entitled:
Five Million P.A.Y.Ers The Chancellor Would Not Miss.
It was not I who invented that horrible noun, "P.A.Y.Ers," but the right hon. Gentleman.
It was in that article that he adumbrated the idea of a minimum earned income relief. The minority and the majority of the Royal Commission thought on the same lines, and the right hon. Gentleman may have given important thoughts to the world in consequence. Perhaps we shall have the advantage of his views before the debate closes. Of course, a good deal has happened, as I am sure the hon. Member for Sheffield, Park, recognises, since the Royal Commission reported.
Let me first address myself to what the Clause would do. It would provide that the earned income relief should be a minimum of £120, if that amount exceeded two-ninths of the taxpayer's earned income. In other words, the allowance on an earned income of £400 would be £120 instead of about £89, as the law stands. That being the case, as there are very large numbers of taxpayers, I am sure that the hon. Member will appreciate that the cost would be very considerable. It would be further increased by a technical mistake in the drafting of the Clause.
The Royal Commission advocated system of a minimum earned income relief, because that seemed both to the majority and to the minority the best means of taking out of the tax range a large number of small taxpayers. However, since the second Report was presented, a good deal has happened. The 1955 Budget increased the tax-free personal allowances and I am not sure whether hon. and right hon. Gentlemen who are still keen on this idea of a minimum earned income relief fully realise how much it will cost over and above the cost, which has already been granted by Parliament, of the increased tax-free allowances.
If I remember rightly, the minority of the Royal Commission, on whose views the hon. Member is founding himself, accompanied its suggestion of a minimum earned income relief with a recommendation that the single person's tax-free allowance should actually be cut, that it should be reduced from £120, as it then was, to £100 and that a married man's tax-free allowance should be reduced from £210 to £200. However, the trend has been in the opposite direction. In the 1955 Budget, the tax-free allowance for a single person, instead of being reduced, was increased from £120 to £140 and the tax free allowance for a married couple was increased from £210 to £240.
We devised a means by which we could do what the Royal Commission was seeking, while, at the same time, preventing the full benefit from running right up to the higher incomes. We accompanied the increase in the tax-free personal allowances with a cut in the band of income chargeable at the lowest of the three reduced rates. In the 1955 Budget we were achieving the main purpose of the Royal Commission by a separate device.
I do not want to slip out of answering the case made by the hon. Member merely upon the grounds that it is now out of date.

Mr. Mulley: I am sure that the right hon. Gentleman will not ignore the difficulties experienced by the Opposition because of the constitutional rules about moving Amendments relating to taxation. That is one of the reasons why we did not take up some of the other points he has made. I am sure he will not suggest that the 1955 Budget failed to pass on many additional advantages in the way of personal tax allowances to people in the higher income groups.

Mr. Brooke: If the hon. Member were Financial Secretary—and I am quite prepared to share my work with somebody—he would find that an enormous number of taxpayers, not merely in the higher but also in the medium range of income groups, write to their Members of Parliament complaining that the cut in the band chargeable at the lowest of the reduced rates has deprived them of practically all, though not quite all, the advantages that they would otherwise have gained from the increased tax-free allowances. That expedient, introduced in 1955, was extremely successful in accomplishing the object of the Royal Commission.
The hon. Member is now quite reasonably adumbrating to the House the idea of a tax-free minimum earned income relief. I should like to examine what that would mean in practice. It would exempt a considerable number of taxpayers from taxation, and would do so in a manner which, administratively, would be both complicated and expensive. In many cases tax offices would have to make forecasts of taxpayers' incomes a year ahead, so as to decide provisionally whether they would or would not be within the scope of this relief in that year, and then make the necessary adjustments to P.A.Y.E. codings where it was thought that the taxpayers concerned would be within the range of earnings affected.
A great deal of work would be entailed in making those forecasts, and after that a great deal more would have to be done in correcting them and clearing up the liability. Moreover, the hon. Member will probably accept from me that this scheme would not be at all easy to explain


to the taxpaying public. He is thinking of it as a scheme which would benefit small taxpayers, whose numbers amount to millions. The present plan of an earned income relief amounting to a certain fixed fraction of earned income has become reasonably familiar to taxpayers.
The proposal contained in the Clause is quite a new conception, and one which, for the reasons I have explained, would complicate P.A.Y.E. codings and lead to a certain amount of hit-or-miss work, and a great deal of clearing up work at the end of the year. Those were some of the reasons which led us in 1955 to seek a simpler method of achieving the object of the Royal Commission.
In this case, the hon. Member has suggested a minimum earned income allowance of £120, which was the figure recommended in the minority Report of the Royal Commission. Of course, it was recommended by them in the light of the personal allowances as they then were and of the reduced personal allowances that they suggested at the time. In fact, thanks to the 1955 Budget, the figures at which tax becomes payable by individuals and by married people have risen substantially, so to that extent also there is not the same case for it.
I must give the cost of this, of which I think the hon. Member himself stood in fear. He will not be unaware that the minority Report of the Royal Commission was setting itself to work out a scheme which would produce overall a rough balance, leaving the yield of revenue unaffected. I recognise at once that it is not possible for private Members to move new Clauses which can offset tax concessions with tax increases that may fall upon other people. But the cost of this is almost as fearsome in present circumstances as the cost of the last new Clause which I was obliged to reject. The cost of this one would be about £68 million a year in a full year, which is something that my right hon. Friend could not afford.
Faulty drafting has somewhat increased the cost of the Clause. I am not sure whether the hon Member really intended to give relief to people who have no earned income at all. But were the House, by a mischance, to write this

Clause into the law I must advise that it would give an extra allowance not only to small earned income taxpayers, but to Surtax payers living on investment incomes. For that reason alone I could not recommend the acceptance of this Clause.
But I do not rest on that. I recognise, perhaps better than most, the extreme difficulty of drafting Clauses which will achieve precisely the purpose in mind. I am asking the House to reject the Clause on two grounds, first, that in the 1955 Budget we have substantially, by a different method, fulfilled the Royal Commission's purpose, and secondly, that were we now to adopt this new Clause, it would cost over £60 million of revenue.

Mr. Jay: I thank the Financial Secretary for his tribute to my consistency, and also for his attribution to me of the parentage of this idea. But, in all honesty, I must say that the latter compliment is not justified. So far as I can recall, it was one of the members of the Royal Commission who suggested the idea to me, and I made use of it before the Report actually appeared, so I think it had a common parentage.
The Financial Secretary rightly told us that the cost of this change would be very large, and naturally that weighed heavily on him and the Chancellor. However, I will say to the Chancellor that when he said a few days ago that the total cost of all the Amendments proposed by the Opposition would amount to £600 million, I think he was overlooking the fact that since we discussed these matters one by one, they are, of course, alternatives. It is never proposed by an Opposition that when a whole lot of Amendments have been turned down we should discuss the later Amendments on the assumption that the earlier Amendments have not been turned down.
10.0 p.m.
In any case, I remember one hon. Member opposite—when the Conservatives were in Opposition—describing the various Amendments put forward to a Finance Bill as an annual parade set out in order that everybody should have a look at it. I would not go as far as that, but we have to remember that these are alternatives, and among the alternatives


we attach a good deal of importance and priority to the idea behind this proposal.
I do not think the Financial Secretary disposes of the argument simply by saying that the Government went some way in the Budget of 1955 to achieve the purpose which the Commission had in putting this idea forward. To some extent, I agree, the same ground was covered, but the Financial Secretary will also agree that it is perfectly practicable to make a second instalment and to carry the general idea still further.
The idea which we wish to put before the House at this stage is that there should be a reduction of Income Tax by way of the exemption of a number of people at the lower end of the scale, without extending it to the higher end and certainly not to the top of the scale. This is an idea, I feel, with which the hon. Lady the Member for Tynemouth (Dame Irene Ward) would have some sympathy.
At any rate, we see several strong reasons for some move in this direction. First of all, we on this side of the House believe that, particularly in an inflationary period, there is a strong argument for shifting the burden of tax somewhat from personal incomes to the taxation of business profits. In an inflationary period there is a tendency all the time for the real incomes of individuals to fall and for business profits to rise, and that in itself is an argument in this direction.
Secondly, it seems to us—and this was an argument which I put forward in the article which the right hon. Gentleman quoted—that we are still collecting very small amounts of tax from a very large number of people. I still doubt whether it is worth the administrative trouble involved. The total revenue from Income Tax is now about £2,000 million. The total from Schedule E is only £500 million to £600 million. It is probably still true—and the Financial Secretary can say whether this is wrong—that from 5 million people, or about one-third of the Income Tax payers, we collect only about £40 million to £50 million. I should have thought that they could be given complete exemption with the loss of very little revenue and with the saving of a great deal of trouble. Does the hon. Lady the Member for Tynemouth wish to intervene?

Dame Irene Ward: No.

Mr. Jay: The hon. Lady looked so interested in what I was saying——

Dame Irene Ward: I am very interested.

Mr. Jay: —that I thought she was trying to make an interjection.
If she does not wish to intervene, I will rapidly make the third point of my argument, which is that both the minority and the majority of the Commission argued very strongly that, as a result of the fall in the value of money since before the war, the tax was continually pressing lower down than before and probably lower than Parliament had ever intended. The minority put it this way:
In the first place, the starting point of liability is at a much lower level of real income than before the war.
The majority of the Commission gave the actual figures—and this was two years ago since when, as we all know, the cost of living has risen considerably. They said that the single man with an earned income of £500 pays 11 per cent. of his income in tax. In 1938 conditions and at 1938 prices such a man could not have been expected to be earning more than £250, and at £250 on present tax rates he would pay less than 5 per cent. Therefore, there has been a considerable increase in the burden on the same real incomes of those at the lower end of the scale.
For all those reasons, it seems to me that even allowing, as I think the Financial Secretary has shown, that the drafting of this particular Clause is not perfect, there are still strong grounds for accepting this proposal, and I hope that the Chancellor will bear this in mind in any future Budget he may be contemplating—either before or during next April—and will seriously consider giving relief of this kind to the large number of taxpayers at the bottom end of the scale who are paying very small amounts.

Dame Irene Ward: I shall not detain the House very long, but I am grateful for the opportunity of saying a word about what I think the Government ought to do in relief of taxation for the small fixed income groups. I am very glad to be able to say straight away that, although it has not been my good fortune to have my proposals considered by the House, I am, nevertheless, delighted that an opportunity has arisen on which some


discussion at any rate of the plight of these people can take place.
I have listened with very great interest to what my right hon. Friend the Financial Secretary has had to say. Of course, he has great charm in the presentation of his case. He has great clarity in explaining the reasons why he cannot do anything, but I noticed—and I want to put this on the record, and that is why I have been trying to catch your eye, Mr. Speaker—that my right hon. Friend never gave any indication that he would consider whether anything could be done to help this section of the community. I must say that I took very great exception to that.
The recent expressions of opinion that have fallen from the lips of the Treasury Ministers have all been in the direction of saying that the stemming of inflation will, of course, bring greater benefits to these people than will anything else. Of course, in considering the general security and financial stability of the country, I would agree, but what I want to put on the record is that in at least two major speeches recently made in the country the Prime Minister and the Chancellor—both important, indeed the important, members of the Government—went out of their way to select, to mention and to emphasise the position of the small fixed income groups, and to give specific pledges that something would be done.
I can very well appreciate that from the point of view of the finance involved the methods that have been suggested by right hon. and hon. Gentlemen opposite may not necessarily commend themselves to my right hon. Friend. That I well understand, but what I want to know is what is going to be done. What is going to be done?

Mr. John Rankin: Do not trust the Tories.

Dame Irene Ward: The hon. Gentleman says, "Do not trust the Tories." All I can say is that the Tories have done a great deal more for the small fixed income groups than have right hon. and hon. Members opposite. Believe me, I am not playing in the camp of the party opposite, because I think that they "pinched" this idea from me.
At this stage I have only one further comment to make on my right hon.

Friend's speech. He drew attention to the effect of the action that had been taken by the Chancellor in the last Budget. I was very pleased about that, but he failed to refer to the mean little trick that was coupled with the increase in the personal allowance, and that was the reduction of the band of taxable income from £100 to £60. That reduction made a tremendous difference to the small income groups.
I know that my right hon. Friend has on several occasions pointed out that the reason was that the Royal Commission had pointed out that the benefit of the level of Income Tax payment starting at a higher rate should not be carried on to the highest income groups. We accept that, of course. If it was the intention of my right hon. Friend to protect those living upon small fixed incomes and not to help those in the higher income groups, he could, of course, have put a ceiling at which that reduction from £100 to £60 came into force.
I say again that I think it was a very mean trick indeed. Of course, what happened was that all the people who had reasonable incomes got the benefit of the reduction of the standard rate of Income Tax, and the people having between, say, £250 and £500 got very little benefit at all because the benefit that they did get was offset by the reduction in this band of taxation.
I am waiting to hear from Treasury Ministers what they really are considering. I hope that my right hon. Friend is not just going to come down to the House and give all the reasons why he rejects the basic proposals of hon. and right hon. Gentlemen opposite, giving no constructive suggestions of his own. As I say, I do not want to go into this whole matter further tonight. I have noticed that the Economic Secretary is always referring nowadays to the speech which I made in which I said that I was going to take a hammer; I am going to take just one tiny hammer tonight—nothing will induce me to vote for my Government.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 170, Noes 217.

Division No. 258.]
AYES
[9.27 p.m


Ainsley, J. W.
Crossman, R. H. S.
Holmes, Horace


Albu, A. H.
Cullen, Mrs. A.
Howell, Denis (All Saints)


Allaun, Frank (Salford, E.) 
Dalton, Rt. Hon. H.
Hoy, J. H.


Allen, Arthur (Bosworth) 
Darling, George (Hillsborough)
Hubbard, T. F.


Allen, Scholefield (Crewe) 
Davies, Ernest (Enfield, E.)
Hughes, Cledwyn (Anglesey)


Awbery, S. S.
Davies, Harold (Leek)
Hughes, Emrys (S. Ayrshire)


Baird, J.
Davies, Stephen (Merthyr)
Hughes, Hector (Aberdeen, N.)


Balfour, A.
Deer, G.
Hunter, A. E.


Bellenger, Rt. Hon. F. J.
de Freitas, Geoffrey
Hynd, J. B. (Attercliffe)


Benn, Hn. Wedgwood (Bristol, S. E.) 
Delargy, H. J.
Irvine, A. J. (Edge Hill)


Benson, G.
Dugdale, Rt. Hn. John (W. Brmwch)
Irving, S. (Dartford)


Beswick, F.
Dye, S.
Isaacs, Rt. Hon. G. A.


Bevan, Rt. Hon. A. (Ebbw Vale) 
Ede, Rt. Hon. J. C.
Janner, B.


Blackburn, F.
Edwards, W. J. (Stepney)
Jay, Rt. Hon. D. P. T.


Blenkinsop, A.
Evans, Edward (Lowestoft)
Jeger, George (Goole)


Boardman, H.
Evans, Stanley (Wednesbury)
Jenkins, Roy (Stechford)


Bottomley, Rt. Hon. A. G. 
Fernyhough, E.
Johnson, James (Rugby)


Bowden, H. W. (Leicester, S.W.) 
Fletcher, Eric
Jones, Rt. Hon. A. Creech (Wakefield)


Boyd, T. C.
Forman, J. C.
Jones, David (The Hartlepools)


Braddock, Mrs. Elizabeth 
Fraser, Thomas (Hamilton)
Kenyon, C.


Brockway, A. F.
Gibson, C. W.
Key, Rt. Hon. C. W.


Broughton, Dr. A. D. D. 
Gordon Walker, Rt. Hon. P. C.
King, Dr. H. M.


Burke, W. A.
Grenfell, Rt. Hon. D. R.
Lawson, G. M.


Burton, Miss F. E.
Grey, C. F.
Lee, Frederick (Newton)


Butler, Herbert (Hackney, C.) 
Griffiths, Rt. Hon. James (Llanelly)
Lever, Leslie (Ardwick)


Callaghan, L. J.
Hale, Leslie
Lipton, Lt.-Col. M.


Castle, Mrs. B. A.
Hall, Rt. Hn. Glenvil (Colne Valley)
Logan, D. G.


Champion, A. J.
Hamilton, W. W.
Mabon, Dr. J. Dickson


Chapman, W. D.
Hannan, W.
MacColl, J. E.


Chetwynd, G. R.
Harrison, J. (Nottingham, N.)
McInnes, J.


Clunie, J.
Hastings, S.
McKay, John (Wallsend)


Coldrick, W.
Hayman, F. H.
McLeavy, Frank


Collick, P. H. (Birkenhead)
Henderson, Rt. Hn. A. (Rwly Regis)
MacPherson, Malcolm (Stirling)


Collins, V. J. (Shoreditch &amp; Finsbury)
Herbison, Miss M.
Mahon, Simon


Corbet, Mrs. Freda
Hewitson, Capt. M.
Mallalieu, J. P. W. (Huddersfd, E.)


Craddock, George (Bradford, S.)
Hobson, C. R.
Marquand, Rt. Hon. H. A.


Cronin, J. D.
Holman, P.
Mellish, R. J.




Messer, Sir F.
Proctor, W. T.
Thornton, E.


Mikardo, Ian
Pryde, D. J.
Timmons, J.


Mitchison, G. R.
Randall, H. E.
Tomney, F.


Moody, A. S.
Rankin, John
Ungoed-Thomas, Sir Lynn


Mort, D. L.
Redhead, E. C.
Wade, D. W.


Moss, R.
Reid, William
Warbey, W. N.


Mulley, F. W.
Roberts, Albert (Normanton)
Weitzman, D.


Noel-Baker, Francis (Swindon)
Roberts, Goronwy (Caernarvon)
Wells, Percy (Faversham)


Oliver, G. H.
Robinson, Kenneth (St. Pancras, N.)
Wells, William (Walsall, N.)


Oswald, T.
Rogers, George (Kensington, N.)
West, D. G.


Owen, W. J.
Shurmer, P. L. E.
Wheeldon, W. E.


Padley, W. E.
Silverman, Julius (Aston)
Wilkins, W. A.


Paget, R. T.
Silverman, Sydney (Nelson)
Williams, David (Neath)


Paling, Rt. Hon. W. (Dearne Valley)
Slater, J. (Sedgefield)
Williams, Rev. Llywelyn (Ab'tillery)


Palmer, A. M. F.
Soskice, Rt. Hon. Sir Frank
Williams, W. R. (Openshaw)


Pannell, Charles (Leeds, W.)
Sparks, J. A.
Willis, Eustace (Edinburgh, E.)


Pargiter, G. A.
Steele, T.
Winterbottom, Richard


Parker, J.
Strachey, Rt. Hon. J.
Woodburn, Rt. Hon. A.


Parkin, B. T.
Stross, Dr. Barnett (Stoke-on-Trent, C.)
Yates, V. (Ladywood)


Plummer, Sir Leslie
Summerskitl, Rt. Hon. E.
Zilliacus, K.


Popplewell, E.
Swingler, S. T.



Price, J. T. (Westhoughton)
Taylor, John (West Lothian)
TELLERS FOR THE AYES:


Price, Philips (Gloucestershire, W.)
Thomas lorwerth (Rhondda, W.)
Mr. Pearson and Mr. Simmons



Probert, A. R.
Thompson, George (Dundee, E.)





NOES


Agnew, Cmdr. P. G.
Donaldson, Cmdr. C. E. McA.
Jennings, J. C. (Burton)


Aitken, W. T.
Doughty, C. J. A.
Johnson, Eric (Blackley)


Allan, R. A. (Paddington, S.)
Drayson, G. B.
Johnson, Howard (Kemptown)


Alport, C. J. M.
du Cann, E. D. L.
Jones, Rt. Hon. Aubrey (Hall Green)


Amery, Julian (Preston, N.)
Duncan, Capt. J. A. L.
Joseph, Sir Keith


Anstruther-Gray, Major Sir William
Duthie, W. S.
Joynson-Hicks, Hon. Sir Lancelot


Armstrong, C. W.
Eden, J. B. (Bournemouth, West)
Kaberry, D.


Ashton, H.
Elliot, Rt. Hon. W. E.
Keegan, D.


Astor, Hon. J. J.
Emmet, Hon. Mrs. Evelyn
Kerby, Capt. H. B.


Atkins, H. E.
Errington, Sir Eric
Kerr, H. W.


Baldock, Lt.-Cmdr. J. M.
Fell, A.
Kimball, M.


Baldwin, A. E.
Fisher, Nigel
Kirk, P. M.


Balniel, Lord
Fleetwood-Hesketh, R. F.
Lagden, G. W.


Barber, Anthony
Fletcher-Cooke, C.
Lambert, Hon. G.


Barlow, Sir John
Foster, John
Lancaster, Col. C. G.


Barter, John
Freeth, D. K.
Langford-Holt, J. A.


Beamish, Maj. Tufton
Galbraith, Hon. T. G. D.
Leather, E. H. C.


Bell, Ronald (Bucks, S.)
George, J. C. (Pollok)
Leavey, J. A.


Bennett, F. M. (Torquay)
Gibson-Watt, D.
Leburn, W. G.


Bevins, J. R. (Toxteth)
Glover, D.
Legge-Bourke, Maj. E. A. H.


Bidgood, J. C.
Godber, J. B.
Legh, Hon. Peter (Petersfield)


Biggs-Davison, J. A.
Gomme-Duncan, Col. Sir Alan
Lindsay, Hon. James (Devon, N.)


Birch, Rt. Hon. Nigel
Gough, C. F. H.
Lindsay, Martin (Solihull)


Bishop, F. P.
Gower, H. R.
Linstead, Sir H. N.


Black, C. W.
Graham, Sir Fergus
Lloyd-George, Maj. Rt. Hon. G.


Body, R. F.
Grant, W. (Woodside)
Lucas, Sir Jocelyn (Portsmouth, S.)


Boothby, Sir Robert
Grant-Ferris, Wg Cdr. R. (Nantwich)
Lucas-Tooth, Sir Hugh


Bossom, Sir Alfred
Green, A.
Mackeson, Brig. Sir Harry


Boyd-Carpenter, Rt. Hon. J. A.
Harris, Frederic (Croydon. N. W.)
Mackie, J. H.(Galloway)


Boyle, Sir Edward
Harrison, Col. J. H. (Eye)
McLaughlin, Mrs. P.


Braine, B. R.
Harvey, Ian (Harrow, E.)
Maclay, Rt. Hon. John


Bromley-Davenport, Lt.-Col. W. H.
Harvey, John (Walthamstow, E.)
McLean, Neil (Inverness)


Brooke, Rt. Hon. Henry
Hay, John
MacLeod, John (Ross &amp; Cromarty)


Browne, J. Nixon (Craigton)
Heath, Rt. Hon. E. R. G.
Macmillan, Rt. Hn. Harold (Bromley)


Bryan, P.
Henderson, John (Cathcart)
Maddan, Martin


Buchan-Hepburn, Rt. Hon. P. G. T.
Hill, Rt. Hon. Charles (Luton)
Maitland, Cdr. J. F. W. (Horncastle)


Bullus, Wing Commander E. E.
Hill, Mrs. E. (Wythenshawe)
Maitland, Hon. Patrick (Lanark)


Burden, F. F. A.
Hill, John (S. Norfolk)
Manningham-Buller, Rt. Hn. Sir R.


Butcher, Sir Herbert
Hinchingbrooke, Viscount
Markham, Major Sir Frank


Campbell, Sir David
Hirst, Geoffrey
Marlowe, A. A. H.


Channon, H.
Holland-Martin, C. J.
Marshall, Douglas


Chichester-Clark, R.
Hornby, R. P.
Mathew, R.


Clarke, Brig. Terence (Portsmth, W.)
Hornsby-Smith, Miss M. P.
Maude, Angus 


Cole, Norman
Horsbrugh, Rt. Hon. Dame Florence
Mawby, R. L.


Conant, Maj. Sir Roger
Howard, Hon. Greville (St. Ives)
Maydon, Lt.-Comdr. S. L. C.


Cordeaux, Lt.-Col. J. K.
Howard, John (Test)
Medlicott, Sir Frank


Corfield, Capt. F. V.
Hudson, Sir Austin (Lewisham, N.)
Molson, Rt. Hon. Hugh


Craddock, Beresford (Spelthorne)
Hughes Hallett, Vice Admiral J.
Moore, Sir Thomas


Crouch, R. F.
Hughes-Young, M. H. C.
Nabarro, G. D. N.


Crowder, Sir John (Finchley)
Hulbert, Sir Norman
Nairn, D. L. S.


Cunningham, Knox
Hurd, A. R.
Neave, Airey


Currie, G. B. H.
Hutchison, Sir Ian Clark (E'b'gh, W.)
Nicholls, Harmar


Dance, J. C. G.
Hutchison, Sir James (Sootstoun)
Nicholson, Godfrey (Farnham)


Davidson, Viscountess
Hyde, Montgomery
Nicolson, N. (B'n'm'th, E. &amp; Chr'eh)


D'Avigdor-Goldsmid, Sir Henry
Iremonger, T. L.
Nield, Basil (Chester)


Deedes, W. F.
Irvine, Bryant Godman (Rye)
Oakshott, H. D.


Digby, Simon Wingfield
Jenkins, Robert (Dulwich)
Ormsby-Gore, Hon. W. D.




Orr, Capt. L. P. S.
Russell, R. S.
Turton, Rt. Hon. R. H.


Orr-Ewing, Charles Ian (Hendon, N.)
Schofield, Lt.-Col. W.
Vane, W. M. F.


Page, R. G.
Scott-Miller, Cmdr. R.
Vickers, Miss J. H.


Partridge, E.
Sharples, R. C.
Vosper, D. F.


Peyton, J. W. W.
Smyth, Brig. Sir John (Norwood)
Walker-Smith, D. C.


Pitt, Miss E. M.
Spearman, Sir Alexander
Wall, Major Patrick


Pott, H. P.
Speir, R. M.
Ward, Hon. George (Worcester)


Powell, J. Enoch
Stevens, Geoffrey
Ward, Dame Irene (Tynemouth)


Prior-Palmer, Brig. O. L.
Steward, Harold (Stockport, S.)
Waterhouse, Capt. Rt. Hon. C.


Profumo, J. D.
Steward, Sir William (Woolwich, W.)
Whitelaw, W. S. I. (Penrith &amp; Border)


Raikes, Sir Victor
Stoddart-Scott, Col. M.
Williams, Paul (Sunderland, S.)


Rawlinson, Peter
Studholme, Sir Henry
Williams, R. Dudley (Exeter)


Redmayne, M.
Taylor, William (Bradford, N.)
Wills, G. (Bridgwater)


Remnant, Hon. P.
Teeling, W.
Wilson, Geoffrey (Truro)


Renton, D. L. M.
Thomas, Leslie (Canterbury)
Wood, Hon. R.


Ridsdale, J. E.
Thomas, P. J. M. (Conway)
Woollam, John Victor


Rippon, A. G. F.
Thompson, Kenneth (Walton)



Rodgers, John (Sevenoaks)
Tiley, A. (Bradford, W.)
TELLERS FOR THE NOES:


Roper, Sir Harold
Tilney, John (Wavertree)



Ropner, Col. Sir Leonard
Turner, H. F. L.
Mr. R. Thompson and




Mr. E. Wakefield.

Division No. 259.]
AYES
[10.12 p.m.


Ainsley, J. W.
Grey, C. F.
Paling, Rt. Hon. W. (Dearne Valley)


Albu, A. H.
Griffiths, Rt. Hon. James (Llanelly)
Palmer, A. M. F.


Allaun, Frank (Salford, E.)
Hamilton, W. W.
Pannell, Charles (Leeds, W.)


Allen, Arthur (Bosworth)
Hannan, W.
Pargiter, G. A.


Allen, Scholefield (Crewe)
Harrison, J. (Nottingham, N.)
Parker, J.


Awbery, S. S.
Hayman, F. H.
Parkin, B. T.


Bacon, Miss Alice
Henderson, Rt. Hn. A. (Rwly Regis)
Popplewell, E.


Baird, J.
Herbison, Miss M.
Price, J. T. (Westhoughton)


Balfour, A.
Hewitson, Capt. M.
Price, Philips (Gloucestershire, W.)


Benn, Hn. Wedgwood (Bristol, S.E.)
Hobson, C. R.
Probert, A. R.


Benson, G.
Holman, P.
Proctor, W. T.


Beswick, F.
Holmes, Horace
Pryde, D. J.


Bevan, Rt. Hon. A. (Ebbw Vale)
Howell, Denis (All Saints)
Randall, H. E.


Blackburn, F.
Hoy, J. H.
Rankin, John


Blenkinsop, A.
Hubbard, T. F.
Redhead, E. C.


Boardman, H.
Hughes, Cledwyn (Anglesey)
Reid, William


Bottomley, Rt. Hon. A. G.
Hughes, Emrys (S. Ayrshire)
Roberts, Albert (Normanton)


Bowden, H. W. (Leicester, S.W.)
Hughes, Hector (Aberdeen, N.)
Roberts, Goronwy (Caernarvon)


Boyd, T. C.
Hunter, A. E.
Robinson, Kenneth (St. Pancras, N.)


Braddock, Mrs. Elizabeth
Hynd, J. B. (Attercliffe)
Rogers, George (Kensington, N.)


Brockway, A. F.
Irvine, A. J. (Edge Hill)
Shurmer, P. L. E.


Broughton, Dr. A. D. D.
Irving, S. (Dartford)
Silverman, Julius (Aston)


Burke, W. A.
Janner, B.
Silverman, Sydney (Nelson)


Burton, Miss F. E.
Jay, Rt. Hon. D. P. T.
Simmons, C. J. (Brierley Hill)


Butler, Herbert (Hackney, C.)
Jeger, George (Goole)
Slater, J. (Sedgefield)


Callaghan, L. J.
Johnson, James (Rugby)
Sorensen, R. W.


Castle, Mrs. B. A.
Jones, Rt. Hon. A. Creech (Wakefield)
Soskice, Rt. Hon. Sir Frank


Champion, A. J.
Jones, David (The Hartlepools)
Sparks, J. A.


Chetwynd, G. R.
Kenyon, C.
Steele, T.


Clunie, J.
Key, Rt. Hon. C. W.
Stewart, Michael (Fulham)


Coldrick, W.
King, Dr. H. M.
Strachey, Rt. Hon. J.


Collick, P. H. (Birkenhead)
Lawson, G. M.
Summerskill, Rt. Hon. E.


Collins, V. J. (Shoreditch &amp; Finsbury)
Lee, Frederick (Newton)
Taylor, John (West Lothian)


Corbet, Mrs. Freda
Lever, Leslie (Ardwick)
Thomas, Iorwerth (Rhondda, W.)


Craddock, George (Bradford, S.)
Logan, D. G.
Thompson, George (Dundee, E.)


Crossman, R. H. S.
Mabon, Dr. J. Dickson
Thornton, E.


Cullen, Mrs. A.
MacColl, J. E.
Timmons, J.


Dalton, Rt. Hon. H.
McInnes, J.
Tomney, F.


Davies, Ernest (Enfield, E.)
McKay, John (Wallsend)
Ungoed-Thomas, Sir Lynn


Davies, Harold (Leek)
McLeavy, Frank
Warbey, W. N.


Davies, Stephen (Merthyr)
MacPherson, Malcolm (Stirling)
Weitzman, D.


Deer, G.
Mahon, Simon
Wells, William (Walsall, N.)


de Freitas, Geoffrey
Mallalieu, J. P. W. (Huddersfd, E.)
West, D. G.


Delargy, H. J.
Marquand, Rt. Hon. H. A.
Wheeldon, W. E.


Dodds, N. N.
Mellish, R. J.
White, Mrs. Eirene (E. Flint)


Dugdale, Rt. Hn. John (W. Brmwch)
Mikardo, Ian
Williams, David (Neath)


Dye, S.
Mitchison, G. R.
Williams, Rev. Llywelyn (Ab'tillery)


Ede, Rt. Hon. J. C.
Moody, A. S.
Williams, W. R. (Openshaw)


Edwards, W. J. (Stepney)
Mort, D. L.
Willis, Eustace (Edinburgh, E.)


Evans, Edward (Lowestoft)
Moss, R.
Winterbottom, Richard


Evans, Stanley (Wednesbury)
Mulley, F. W.
Woodburn, Rt. Hon. A.


Fernyhough, E.
Noel-Baker, Francis (Swindon)
Yates, V. (Ladywood)


Fletcher, Eric
Oliver, G. H.
Younger, Rt. Hon. K.


Forman, J. C.
Orbach, M.
Zilliacus, K.


Fraser, Thomas (Hamilton)
Oswald, T.



Gibson, C. W.
Owen, W. J.
TELLERS FOR THE AYES:


Gordon Walker, Rt. Hon. P. C.
Padley, W. E.
Mr. Pearson and Mr. Wilkins.


Grenfell, Rt. Hon. D. R.
Paget, R. T.






NOES


Agnew, Cmdr. P. G.
Bishop, F. P.
Corfield, Capt. F. V.


Aitken, W. T.
Black, C. W.
Craddock, Beresford (Spelthorne)


Allan, R. A. (Paddington, S.)
Body, R. F.
Crouch, R. F.


Alport, C. J. M.
Boothby, Sir Robert
Cunningham, Knox


Amery, Julian (Preston, N.)
Bossom, Sir Alfred
Currie, G. B. H.


Anstruther-Gray, Major Sir William
Boyd-Carpenter, Rt. Hon. J. A.
Dance, J. C. G.


Armstrong, G. W.
Boyle, Sir Edward
Davidson, Viscountess


Ashton, H.
Braine, B. R.
D'Ayigdor-Goldsmid, SirHenry


Atkins, H. E.
Bromley-Davenport, Lt.-Col. W. H.
Deedes, W. F.


Baldock, Lt.-Cmdr. J. M.
Brooke, Rt. Hon. Henry
Digby, Simon Wingfield


Baldwin, A. E.
Browne, J. Nixon (Craigton)
Donaldson, Cmdr. C. E. McA.


Balniel, Lord
Bryan, P.
Doughty, C. J. A.


Barber, Anthony
Bullus, Wing Commander E. E.
Drayson, G. B.


Barlow, Sir John
Burden, F. F. A.
du Cann, E. D. L.


Barter, John
Butcher, Sir Herbert
Duncan, Capt. J. A. L.


Beamish, Mej. Tufton
Campbell, Sir David
Duthie, W. S.


Bell, Ronald (Bucks, S.)
Channon, H.
Eden, J. B. (Bournemouth, West)


Bennett, F. M. (Torquay)
Chichester-Clark, R.
Elliot, Rt. Hon. W. E.


Bevins, J. R. (Toxteth)
Clarke, Brig. Terence (Portsmth, W.)
Emmet, Hon. Mrs. Evelyn


Biggs-Davison, J. A.
Cole, Norman
Errington, Sir Eric


Birch, Rt. Hon. Nigel
Cordeaux, Lt.-Col. J. K.
Fell, A.






Fisher, Nigel
Kirk, P. M.
Pott, H. P.


Fletcher-Cooke, C.
Lagden, G. W.
Powell, J. Enoch


Foster, John
Lambert, Hon. G.
Prior-Palmer, Brig. O. L.


Freeth, D. K.
Lancaster, Col. C. G.
Profumo, J. D.


Galbraith, Hon. T. G. D.
Langford-Holt, J. A.
Raikes, Sir Victor


George, J. C. (Pollok)
Leather, E. H. C.
Rawlinson, Peter


Gibson-Watt, D.
Leavey, J. A.
Redmayne, M.


Glover, D.
Leburn, W. G.
Remnant, Hon. P.


Godber, J. B.
Legge-Bourke, Maj. E. A. H.
Renton, D. L. M.


Gomme-Duncan, Col. Sir Alan
Legh, Hon. Peter (Petersfield)
Ridsdale, J. E.


Gough, C. F. H.
Lindsay, Hon. James (Devon, N.)
Rippon, A. G. F.


Gower, H. R.
Lindsay, Martin (Solihull)
Rodgers, John (Sevenoaks)


Graham, Sir Fergus
Linstead, Sir H. N.
Roper, Sir Harold


Grant, W. (Woodside)
Lloyd-George, Maj. Rt. Hon. G.
Ropner, Col. Sir Leonard


Grant-Ferris, Wg Cdr. R. (Nantwich)
Longden, Gilbert
Russell, R. S.


Green, A.
Lucas, Sir Jocelyn (Portsmouth, S.)
Schofield, Lt.-Col. W.


Grimston, Sir Robert (Westbury)
Lucas-Tooth, Sir Hugh
Scott-Miller, Cmdr. R.


Harris, Frederic (Croydon, N. W.)
Mackeson, Brig. Sir Harry
Sharples, R. C.


Harrison, Col. J. H. (Eye)
Mackie, J. H. (Galloway)
Shepherd, William


Harvey, Ian (Harrow, E.)
McLaughlin, Mrs. P.
Spearman, Sir Alexander


Harvey, John (Walthamstow, E.)
Maclay, Rt. Hon. John
Speir, R. M.


Heath, Rt. Hon. E. R. G.
McLean, Neil (Inverness)
Stevens, Geoffrey


Henderson, John (Cathcart)
MacLeod, John (Ross &amp; Cromarty)
Steward, Harold (Stockport, S.)


Hill, Rt. Hon. Charles (Luton)
Macmillan Rt. Hn. Harold (Bromley)
Steward, Sir William (Woolwich, W.)


Hill, Mrs. E. (Wythenshawe)
Maddan, Martin
Stoddart-Scott, Col. M.


Hill, John (S. Norfolk)
Maitland, Cdr. J. F. W. (Horncastle)
Studholme, Sir Henry


Hinchingbrooke, Viscount
Maitland, Hon. Patrick (Lanark)
Taylor, William (Bradford, N.)


Hirst, Geoffrey
Manningham-Buller, Rt. Hn. Sir R.
Teeling, W.


Holland-Martin, C. J.
Markham, Major Sir Frank
Thomas, Leslie (Canterbury)


Hornby, R. P.
Marlowe, A. A. H.
Thomas, P. J. M. (Conway)


Hornsby-Smith, Miss M. P.
Mathew, R.
Thompson, Kenneth (Walton)


Horsbrugh, Rt. Hon. Dame Florence
Maude, Angus
Tiley, A. (Bradford, W.)


Howard, Hon. Greville (St. Ives)
Mawby, R. L.
Tilney, John (Wavertree)


Hudson, Sir Austin (Lewisham, N.)
Maydon, Lt.-Comdr. S. L. C.
Turner, H. F. L.


Hughes Hallett, Vice-Admiral J.
Medlicott, Sir Frank
Turton, Rt. Hon. R. H.


Hughes-Young, M. H. C.
Milligan, Rt. Hon. W. R.
Vane, W. M. F.


Hurd, A. R.
Molson, Rt. Hon. Hugh
Vickers, Miss J. H.


Hutchison, Sir Ian Clark (E'b'gh, W.)
Moore, Sir Thomas
Vosper, D. F.


Hyde, Montgomery
Nabarro, G. D. N.
Walker-Smith, D. C.


Iremonger, T. L.
Nairn, D. L. S.
Wall, Major Patrick


Irvine, Bryant Godman (Rye)
Neave, Airey
Ward, Hon. George (Worcester)


Jenkins, Robert (Dulwich)
Nicholls, Harmar
Waterhouse, Capt. Rt. Hon. C.


Jennings, J. C. (Burton)
Nicholson, Godfrey (Farnham)
Whitelaw, W. S. I. (Penrith &amp; Border)


Johnson, Dr. Donald (Carlisle)
Nicolson, N. (B'n'm'th, E. &amp; Chr'ch)
Williams, Paul (Sunderland, S.)


Johnson, Eric (Blackley)
Nield, Basil (Chester)
Williams, R. Dudley (Exeter)


Jones, Rt. Hon. Aubrey (Hall Green)
Oakshott, H. D.
Wills, G. (Bridgwater)


Joseph, Sir Keith
Ormsby-Gore, Hon. W. D.
Wilson, Geoffrey (Truro)


Joynson-Hicks, Hon. Sir Lancelot
Orr, Capt. L. P. S.
Woollam, John Victor


Kaberry, D.
Orr-Ewing, Charles Ian (Hendon, N.)



Keegan, D.
Page, R. G.
TELLERS FOR THE NOES:


Kerby, Capt. H. B.
Partridge, E.
Mr. R. Thompson and


Kerr, H. W.
Paton, John
Mr. E. Wakefield.


Kimball, M.
Pitt, Miss E. M.

New Clause.—(SMALL LOTTERIES AND GAMING.)

(1) The promotion and conduct of small lotteries and small card and gaming parties within the meaning of subsection (1) of section one and of subsection (1) of section four of the Small Lotteries and Gaming Act, 1956, respectively shall not be deemed to be the carrying on of a trade of business for the purposes of income tax and profits tax.

(2) The proceeds of a small lottery within the meaning of subsection (1) and conducted in accordance with the provisions of paragraphs (a) to (m) of subsection (2) of section one of the said Act shall be exempted from income tax and profits tax if and insofar as it is shown to the satisfaction of the Commissioners of Inland Revenue that the said proceeds have been or are to be applied in accordance with the terms of paragraph (d) of subsection (2) of the said section one of the said Act.

(3) The proceeds of a small card and gaming party applied in pursuance of paragraph (c) of subsection (1) of section four of the said Act

shall be exempted from income tax and profits tax if and insofar as it is shown to the satisfaction of the Commissioners of Inland Revenue that the said proceeds have been applied for purposes other than purposes of private gains.

(4) Any claim for exemption from income tax and profits tax under the preceding provisions of this section shall be made to the Commissioners of Inland Revenue in such form as they may prescribe and the said Commissioners shall, on proof of the facts to their satisfaction, allow the claim accordingly. Any person aggrieved by the decision of the said Commissioners may make an application as aforesaid and subsections (2) and (3) of section four hundred and fifty of the Income Tax Act, 1952, shall with any necessary modifications apply thereto.—[Mr. Ernest Davies.]

Brought up, and read the First time.

Mr. Ernest Davies: I beg to move, That the Clause be read a Second time.
I move this Clause as a sequel to the passing of the Small Lotteries and Gaming Act, which I introduced as a Private Member's Bill last November and which received the Royal Assent last Thursday. It has come to light that certain small lotteries are at present attracting the attention of the Inland Revenue and have been subjected to Income Tax. As the House will recall, the Small Lotteries and Gaming Act was designed to legalise those small lotteries which are run for charitable, sporting or other purposes provided that in no circumstances are they run for private gain.
The Measure received an unopposed Second Reading and Third Reading in this House and general support throughout the country. Having brought some order into the law on that matter, having succeeded in legalising those lotteries run for charity and other deserving purposes, having legalised small games such as whist drives, it is most unfortunate now to find that they may be subject to Income Tax.
Those small lotteries are run by a very large number of organisations throughout the country, even by some religious bodies, by hospitals, by schools, and by political parties as well. No money can be made out of them except for the purposes legalised under the Small Lotteries and Gaming Act. The money raised by those lotteries has to be distributed as to 50 per cent. less expenses to the organisations which are organising the lotteries. The expenses are limited to 10 per cent. With the high cost of printing today, and postage, nobody can possibly make very much money out of the organisation of those lotteries. If, after the 50 per cent. at the maximum has been distributed in prize money, and after the 10 per cent. reduction for expenses on the remaining 50 per cent., the amount of money left available for distribution to the clubs or organisations organising the lotteries is subject to Income Tax or Profits Tax, then the amount left for the organisation is reduced substantially.
It is not the intention of the Government, I am sure, that those organisations which are running those lotteries for deserving purposes should be subject to tax in this way. This new Clause makes it clear that any small lottery or game

organised in accordance with the Act shall not be subject to Income Tax or Profits Tax provided, of course, that the purposes for which the money is raised are those which are defined in that Act—charitable purposes, the support of sport and athletics—not being for private gain or for any commercial undertaking.
In those circumstances, it seems reasonable that they should be exempt from all forms of taxation. I suggest to the Chancellor that there is no possibility of the Treasury losing any substantial amount if the Clause is accepted. At present, those organisations which are attracting the attention of the Inland Revenue are, for the most part, supporters' clubs, because it is claimed that they are not always run on a mutuality basis, that is, the members do not have a final say in the distribution of the moneys raised. They are run solely for the purpose of the organisation for which the supporters' club is founded and such supporters' clubs have been subject to tax.
Those which have succeeded in proving that they are run on a mutuality basis have not been subject to tax, but in a number of cases there was an attempt to tax. The total loss to the Treasury cannot be considerable, though if it persists in making these organisations subject to tax it may well bring in a certain amount of revenue.
It is rather unfortunate that, the House having made these lotteries legal and brought them within the law and thus brought the law into respect again and saved it from its former disrepute, the organisers of these lotteries should now find that the lotteries, being legal, are subject to tax whereas when they were illegal they were escaping it for the most part. I know that the Treasury has qualms about living on immoral earnings, but it seems unfortunate that in this case, having made the woman respectable, the Treasury is now taxing her because she is virtuous.
I hope that the Chancellor will be sympathetic to this proposal in view of the fact that he himself has now gone into the gambling business and is launching the Premium Bonds. He should be sympathetic to these small and limited lotteries. The amount of money involved is very little. The amount that can be raised by any of these societies is


limited to £750 per lottery and they are confined to objects which the House has considered worthy.
I ask, therefore, for an assurance from the Government that either these organisations will not attract the attentions of the Inland Revenue in future, or that the new Clause will be accepted.

Mr. Mulley: I beg to second the Motion.
I do not think that it would be the desire of the House that I should detain it very long at this late hour, but I think that this is an important matter. Subject to what the Solicitor-General may tell us, I believe that the law is now substantially changed as a result of the Small Lotteries and Gaming Act, 1956, which was so successfully piloted through the House by my hon. Friend the Member for Enfield, East (Mr. Ernest Davies).
Already, the Inland Revenue is apparently making demands for arrears of tax from the promoters of small lotteries which will now fall within the scope of the tax. I understand that the basis of the claim is that, although the lotteries were illegal by reason of the fact that tickets were sold beyond the limit of the Betting and Lotteries Act, 1934, it was held that the tickets were sold by non-members and, therefore, the lottery became a trading concern and subject to tax in that way. One of the main provisions of the 1956 Act is that now, for the first time, tickets can be sold to non-members of charitable or non-profit making organisations promoting a lottery.
10.30 p.m.
We are, therefore, very much concerned to have from the Solicitor-General either an assurance that this will not bring such lotteries within the general provision of the Income Tax law and make them liable for tax at the Standard Rate, or, alternatively that the hon. and learned Gentleman will accept this Clause, so that the matter may be beyond doubt.
Obviously, it was not the intention of the House when it unanimously passed the Small Lotteries and Gaming Bill, and agreed to the provision that 50 per cent. of the proceeds of such lotteries, after deducting the 10 per cent. allowed for expenses, should go to the charity concerned, that 29 per cent. only should go to the charity and 21 per cent. should go to the Chancellor of the Exchequer.
While the Bill was going through its various stages concern was expressed that by increasing the maximum amount allowed for expenses we were reducing the amount that would go to these worthy charitable organisations. The small increase from 5 per cent. to 10 per cent. in the permitted expense is nothing compared with the reduction in the sum going to charity as a result of tax being deducted at the standard rate.
In a sense it would mean providing revenue by the back door if, as a result of the operation of the tax collector, only 29 per cent. instead of the 50 per cent. provided for in the Bill, which had the support of all quarters both in this House and in another place, went to the charitable and other non-profit making organisations. I hope, therefore, that we shall have either an assurance from the Government on the lines I have suggested or an acceptance by them tonight of this Clause, so that we shall not be faced with the problem which some of us who are concerned with these lotteries fear that we might.

Mr. Simon Mahon: I have no wish, any more than have my hon. Friends, to detain the House at this hour of the night, but in the part of the country from which I come the Measure introduced by my hon. Friend the Member for Enfield, East (Mr. Ernest Davies) is of vital importance.
I think it will be generally agreed that though we are living in a Welfare State there will always be room for personal and private charity. My hon. Friend's small Bill has enabled the religious and charitable organisations to legalise what was a harmless form of lottery in connection with sporting and cultural pursuits. Such a form of lottery is no less deserving because of the way in which it is run, or because of the regularity of its collections. The purposes are still the same and are still very worthy.
I desire to bring to the notice of the House two anomalies which exist in Liverpool. Quite recently I had reason to go into a hospital run by a religious order which takes in patients from State-run hospitals. These patients are cared for by the nuns of this order. They are people who may be dying of cancer or tuberculosis—hopeless cases. The nuns receive 32s. 6d. a week for looking after


them. Such treatment and nursing would not be possible but for the vocationalism and devotion of these excellent women.
My hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock) has given me some up-to-date figures. She is very knowledgable on this subject. In Broad Green Hospital the weekly maintenance figure is £13 18s. 2d. For the Park Hospital, which is run on similar lines for senile cases, the figure is £9 3s. Then there are the Newsham Hospital, £10 8s. 7d.; the Rathbone Hospital, £15 13s. 1d.; and the maternity hospital at Mill Road, £16 17s. 6d.
If a hospital of the sort that I have mentioned—say, St. Vincent's Hospital for the Dying, among many of these excellent institutions—wanted to preserve its private vocationalism and was assisted by a group of charitable people who desired to organise a charity on the lines of this particular form of lottery, there would be nothing wrong with the idea. They would be organising a charity to help such an excellent body.
I want the Chancellor to bear in mind that we are not dealing with a small number of people. I am a manager of all sorts of schools, including county schools, Church of England schools and Roman Catholic schools. I am a Roman Catholic myself, and I have taken a keen interest in voluntary education all my life. I am one of five brothers. I object to the fact that in this matter of education we, as Roman Catholics, are treated differently from everybody else. We were all in the Forces together. Never a ship went out of Liverpool without its Irish complement, or not fully manned. There was never a regiment that was not similarly fully manned. Yet when our people returned home after making our contribution to the war effort, we found that we had to pay twice for our schools.
I realise that there are some here who will not agree with me, but in substantiation of what I have said I would remind the House that there were 38 Roman Catholic V.C.s on parade before Her Majesty the other day. I suggest that we, as Catholics, are entitled to equal treatment with everybody else in the matter of education. I know of one young parish priest—and I do not expect everybody to agree with me, but it has to be said—who is now caring for thousands of people from the City of

Liverpool but who has to pay £250,000 for schools, and the only way he can raise this money——

Mr. Deputy-Speaker (Sir Charles MacAndrew): The hon. Gentleman is getting rather a long way from small lotteries and gaming.

Mr. Mahon: I am trying to keep in order, Mr. Deputy-Speaker.
I am sorry to have kept the House so long, but this sort of thing needs to be said because we are no longer dealing with minorities. Thirty-five per cent. of the children in Liverpool need to go to voluntary establishments, and this presents a great problem. I ask the Chancellor to give this proposed new Clause every possible consideration.

Mr. L. M. Lever: I want, in a few words, to appeal to the Chancellor of the Exchequer to have a heart. By the acceptance of this proposed new Clause, charitable causes affecting all denominations will be assisted. The Small Lotteries and Gaming Act received wholehearted support when it was before the House, because it was realised that it would assist good causes. I know that the Chancellor is conducting a credit squeeze at the moment, but there is no reason why he should squeeze voluntary effort. Ever since 1948 we have been told that what the State provides can only be of a limited character and that it must be supplemented by voluntary effort.
The Measure that was passed recently is designed to assist voluntary effort. Many schools of all denominations and many charitable causes will benefit as a result of the Act promoted by my hon. Friend the Member for Enfield, East (Mr. Ernest Davies).
I hope that the Chancellor will consider that this is a matter which stands in a category entirely of its own. A charity is not a business. It is something specially recognised by law, and it is exempted in many respects from ordinary taxation. There is no reason why efforts designed to assist a good cause should give the Chancellor the benefit of the work of the organisation concerned.
If the Clause is not accepted it will mean that all the good of the Act which has recently been passed will be undone at one stroke by the Chancellor. I appeal


to the right hon. Gentleman. If he accepts this proposal his decision will command the universal respect of every section of the community. It will make people feel that, although the Chancellor has had to embark on certain courses to obtain revenue, he is, at the same time, prepared to give consideration to the voluntary efforts of the people. I appeal to him most fervently and hope that he will accept the new Clause.

Mr. Denis Howell: I do not wish to detain the House for more than a minute—[HON. MEMBERS: "Hear, hear."] Such an incentive as that provided by hon. Members is likely to make me continue for much longer.
This is an extremely important issue in the social life of our various communities, and it is because of that that I wish to submit a short plea to the Chancellor. Those who have anything to do with sporting organisations know perfectly well that it is almost impossible to run a social or sporting club on a financially self-supporting basis.
Unfortunately, this is an age of canned entertainment and there was never a time when it was more important that social activities should be encouraged. People should be encouraged to support football and cricket clubs, and so on, none of which could continue without the help of small lotteries. Recently, in connection with Entertainments Duty on football, I have made a survey of many of the small clubs in the Midlands and I have not discovered one which is financially self-supporting. Not one could continue without the help provided by small lotteries. Although the hour is late, it is right that Parliament should be informed that football and cricket clubs provide the social centres in many small villages, and that we should consider how we can assist these organisations to continue. They cannot continue without the aid of small lotteries.
The same applies in the hospital service where, in spite of the great strides made in the National Health Service, those who serve on hospital management committees see every week the need for Leagues of Friends, the need for people outside the actual organisation of the Service, to contribute funds to give extra benefits to patients and staff. These activities are not possible without the small bands of

people who get together to raise money through small lotteries and in other ways. In other words, these people can raise greater funds, as an organisation, than they can provide from their own resources.
I hope, therefore, that the Chancellor will be no less generous in his attitude to these well-worth-while charities than he has been in his attitude to Premium Bonds. It will be a sad day for the country if voluntary organisations like Leagues of Friends collapse. It will be a sad day for the country if football and cricket clubs and the like, which depend upon income gained from outside their own immediate circle, collapse. I hope that, in the light of the importance of matters which may be regarded by some hon. Members as relatively unimportant but which are important in the social life of the country, the Chancellor will show by his attitude to the Clause that he is prepared to encourage people in voluntary organisations in a no less generous manner than that with which he treats people who invest in Premium Bonds. Because I believe that our social life is important and is in danger, I hope that our plea to the Chancellor will not go unheeded.

10.45 p.m.

The Solicitor-General (Sir Harry Hylton-Foster): We have here jovial jobs or sombre stints to discharge. I put this in the sombre stint class, because I acknowledge myself, as most other hon. Members do, a staunch supporter of the Act of the hon. Member for Enfield, East (Mr. Ernest Davies).
Why I have not at once to receive the proposition with acclamation does not depend upon the good things that are done with the money raised. If it did, my cause would be hopeless. However, I hope that the House will think for a moment of another aspect of the matter to which no one has referred, no doubt for very wise reasons. I do not for a moment challenge, for instance, the kind of account that the hon. Member for Bootle (Mr. Mahon) was giving of the very good services rendered in one form or another by charitable organisations which derive funds from such activities as are here contemplated. However, putting the matter bluntly, by his Clause the hon. Member is asking for a body which is


not a charity a more sweeping exemption than, as a nation, we have ever granted to any charity. It is rather a tall order on the face of it.
Perhaps I might adopt a phrase of the hon. Member for Ardwick (Mr. L. M. Lever) and say that a charity is not a business. Our principle, so far as I know, has always been that, if a charity chooses to descend into the realm of business, then it ought to be dealt with on the basis that it is doing business. Otherwise, it is grossly unfair to other forms of taxpayers who do not have equivalent advantages. If it chooses to enter the field of trade, it would be very unfair to other taxpayers to leave them in a comparatively grossly disadvantageous position.
The bodies for which the hon. Member advances his Clause are, of course, not charities, but for the moment I am discussing the matter as if they were. We as a nation, under every kind of Government, have allowed a charity, if it chooses to enter the field of trade, to be exempt only subject to various strict limitations, which are known to hon. Members and which no one could suggest could apply to the kind of organisation that will run these small lotteries, and so we need not bother with them.
Because the general idea that one should exempt from taxation money which is on the way to such very good objects in the end is attractive, it was put up to the Royal Commission. It had suggested to it the idea that the special exemption granted to charities, under very strict limitations, should be extended to any organisation trading by the use of unpaid labour—the House will recall the passage—and the Royal Commission, having considered it as sympathetically as anybody would who is concerned with the good things which are done with the moneys, came to the conclusion—and my reference is to paragraph 613 of the final Report—that it did not think that it would be sound to extend the exemption in the way sought.
That was on the basis of charities, but of course the bodies with which the suggested new Clause deals would not be charities, nor does it necessarily follow that the moneys which they raised would go to charitable purposes. They might go

to a wide range of purposes, non-commercial purposes, sport, culture, but not necessarily charitable.
I hope that with those few words, which I would not wish to extend at this hour, the House will agree that what is asked under the cloak of such an attractive destination is in fact a vast concession from the principle on which charities which have entered trade have always been taxed under our system and wholly inconsistent with previous concessions and something which a Royal Commission on careful consideration lately rejected.
I do not want in the least to pose as someone who can suggest any ideas to right hon. Gentlemen opposite, but I am bound to say that whereas it may be difficult to bring these lotteries within the principles of mutuality trading—I have no doubt that hon. Members would like to go outside the realm of mutuality and get some money from outside—it seems to me, speaking as an individual, not very difficult to devise an arrangement whereby all the money paid over to the charity can be totally exempt from charge in the hands of the charity.
I am not quite certain where my duty lies, but should an hon. Member or right hon. Member be sufficiently interested in what I am saying, I should like outside this place to give him a reference to a suitable case which I hope will help. That would not involve any departure from the underlying principle of that taxation and would involve an application of the general law to this particular case. I am afraid that on those grounds I feel it necessary to invite the House to say that it could not accept the new Clause.

Mr. H. Wilson: The case to which the Solicitor-General referred was no doubt the Arethusa Training Ship case which, if my memory serves—I have not looked at it for some time—is on page 397 of the Tax Cases volume. I must express a very keen sense of disappointment, shared by hon. Members in other parts of the House—if I may say so without disrespect to the Solicitor-General—that he should have been put up to reply. That is not a reflection on him. We have appreciative recollections of his interventions in Committee, and he always answers our arguments with good humour and courtesy.
However, this was not a legal but a political point of considerable importance. I want to make this very plain, and I hope that the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) will follow the argument as I proceed, although I want to be very brief. For some time the Board of Inland Revenue has been assessing for Income Tax—in some cases for six years back, at 9s. in the £ for the greater part of the period—a number of small charities run by charitable, religious and other bodies. I hope that we shall not waste too much time linking this debate with the Premium Bonds debate, I at any rate made it clear when we were discussing Premium Bonds that I saw all the difference in the world between small lotteries run by charitable, religious, political, sporting and other organisations and the intervention of the State, and certainly I do not want to go into the question of Premium Bonds. But for some time now, certainly for many months, there have been these assessments made.
I heard about the matter purely from a constituency aspect, because I represent an area just outside Liverpool where there are a considerable number of these lotteries run by people for religious purposes, or at any rate, for raising money for purposes of denominational schools. I mentioned the matter to the previous Chancellor of the Exchequer, who I think was as surprised as I was that the Board of Inland Revenue was acting in this way. I mentioned the matter to him some time before the Budget and said that I hoped he would consider it. I know that the matter has been inquired into by the Chancellor personally.
It is a fact that under the law as it stood before the very helpful Measure of my hon. Friend the Member for Enfield, East (Mr. Ernest Davies) became law, it was possible, by various kinds of what might be called legitimate tax avoidance, to avoid paying Income Tax on the proceeds of these efforts chiefly by reference to the principle of what is usually called mutuality; the idea being that tickets were sold only to members of what might be called a community or family and they got the benefits from these efforts. Members of a parish clubbed together in one of these efforts to provide a school or hall or something of benefit to the

parishioners. There was an element of mutuality. It was not trade but a family effort, if hon. Members would care to look at it in that way.
But after the passing of the Act of my hon. Friend, mutuality disappeared, as my hon. Friend made clear, because tickets could be sold to non-members. Therefore it is no longer possible to avoid the levying of Income Tax by recourse to the kind of procedure which I am sure the learned Solicitor-General has in mind. This is a very serious matter, and although the Solicitor-General naturally looks at this from a legal point of view, I hope that the Chancellor will examine it again and find some means of remedying the very difficult situation with which we are faced.
Whatever the lawyers may say, this is not primarily a legal question. It is nonsense to talk about these things being trade. It is a different thing from profit-making or trading organisations, and in practically all cases the profits are applied to religious, cultural or legitimate political purposes. We may have different ideas of what are legitimate political purposes but, as a House of Commons, let us be impartial about that.
I hope that the Chancellor will look at this again and realise that a considerable injustice is being done, and that by the mechanism of the tax law the purposes of my hon. Friend's Act are being frustrated. Until my hon. Friend's Bill became law, many of these lotteries were, or were deemed to be, illegal. But even so, they were being taxed, because the Board of Inland Revenue taxes a lot of things that are illegal. The Chancellor was shocked when I suggested that the Board taxes immoral earnings, but that has been admitted publicly and in the Press.
So long as they were illegal, the Board of Inland Revenue did not tax many of these small lotteries. But now that they are legal, I am afraid there is a danger that many of them will be destroyed by the activities of the tax collector. As was pointed out by my hon. Friend the Member for Bootle (Mr. Mahon) it is particularly serious that taxes are being levied for several years back and there are no funds to meet the tax collector's demands. In the case of the schools referred to by my hon. Friend the Member for Bootle, all the money raised has gone into bricks


and mortar. It is quite impossible for them to raise the money to meet this retrospective tax demand.
11.0 p.m.
I wish to conclude with reference to a rather broader issue which must be in the minds of all hon. Members. I do so with a great sense of delicacy, because it is a matter of which I do not want to make very much. But a considerable number of small lotteries which are now legalised by my hon. Friend's Bill are for the purpose of raising funds for denominational schools.
Every hon. Member may have a different view about denominational schools, and that is not for us to argue, but in the 1944 Education Act a certain compromise was reached about denominational schools, certain estimates were then made of the amount of money likely to be involved. In fact, because of the inflation in building costs, those estimates have been to a considerable extent falsified. Again, purely as a matter of history, the money has been raised, albeit with great difficulty, through small lotteries, football pools and efforts of that kind.
If the Chancellor by this new drive of the Inland Revenue against the proceeds of these efforts is to rob these organisations of their revenue, I for one am extremely alarmed about what may be the consequences. I do not want to overstress that, and none of us would want this to become a party political issue. I would be the last to want that. Speaking as a Non-conformist in a constituency with one of the largest Roman Catholic votes in the country, I know only too well what can be made, and what was made in 1950, of the incursion of this matter into politics.
But I appeal to the Chancellor to consult the Lord Privy Seal about this and to realise what may be involved. Although I say this with a sense of responsibility, and in no party sense, I must warn him that if this particular source of revenue is to be cut off for these religious organisations, as a result of the activities of the Department of Inland Revenue, I am extremely alarmed about the possible consequences.
I hope, therefore, that the Chancellor will get up now and say he will look at this matter again. I know he can do

nothing more about the Finance Bill, because it will go to another place, where amendment is not possible. But I hope he will undertake to look at it, and, if necessary, introduce a small amending Measure to put this matter right. It is a matter that transcends party, and although it may appear small, it is one of which the consequences are incalculable. I beseech him, and I ask the Lord Privy Seal not to let us have this matter dragged into politics again.

Mr. H. Macmillan: I think it would be discourteous of me not to make some reply to the statement which has been made by the right hon. Gentleman, the Member for Huyton (Mr. H. Wilson), which goes far beyond this particular Clause. I asked the Solicitor-General to reply to it because it raises very important legal points. But I should be the first to admit—and the right hon. Gentleman was good enough to write to me about this matter—that these are much broader problems that he has now brought in and which, he would agree, could not possibly be related to this Clause. This Clause goes far beyond the question he raised, both in correspondence with me and which he has raised again tonight, because it would include purposes such as were legalised in the Bill, and go far beyond the question of building denominational schools.
I accept fully the right hon. Gentleman's statement that he does not wish to bring any party question into this, though I am as much aware and as much interested. I have spent a good deal of activity in my life, both at home and in other parts, in trying to face the problems put upon us by the education settlement for the church schools, and I know quite well the struggles we have to keep our schools in the hands of our own Church. I realise those are very heavy burdens on us, and at my own home recently we raised great sums, through considerable efforts, to keep our church school, which we regard as of vital importance to the future of our children.
I admit that these methods, like fêtes, church bazaars, small lotteries, and so on, are used to try to bring us in money. Therefore, it was with a very friendly eye that I looked at this matter when the right hon. Gentleman wrote to me; but neither my advisers nor I have been able to find a method. This Clause would not do it


because it would go far beyond the circumstances with which we are concerned.

Mr. L. M. Lever: Would the Chancellor be prepared to introduce an amendment to assist the denominational schools?

Mr. Macmillan: We have here an amendment; but what I am trying to explain is that, first, we have the new Act which is just beginning to work and, by so doing away with the mutuality principle, we have a new situation in relation to the small lotteries. No responsible Government, or Chancellor, or any Law Officer, could recommend the acceptance of this amendment to the law either in its present form or in a modified form. We must watch the operation of the new Act, and we will do our best to see that this is properly and reasonably worked. Beyond that, I cannot go at present. We will see what possible help can be given

in conforming with the views of Parliament when it passed that Act, but I cannot ask the House to accept a Clause which goes far beyond it.

I promise to give further study to this subject, and will see that nothing harsh, nor that any heavy burden, is brought about by sticking to the principles of the law. What I cannot do is to ask the House to go far beyond those principles which, I remind hon. Members, successive Governments have for so long followed in the assessment of Income Tax in efforts of this kind—all of which are clearly laid down on a determined basis. I cannot advise the House to vote for a Clause which it is not possible in its conscience to do.

Question put, That the Clause be read a Second time.

The House divided: Ayes, 146: Noes, 200.

Division No. 260.]
AYES
[11.8 p.m.


Albu, A. H.
Fraser, Thomas (Hamilton) 
Oliver, G. H. 


Allaun, Frank (Salford, E.)
Gibson, C. W.
Orbach, M.


Allen, Scholefield (Crewe)
Gordon Walker. Rt. Hon. P. C.
Oswald, T.


Awbery, S. S.
Greenwood, Anthony
Padley, W. E.


Bacon, Miss Alice
Grenfell, Rt. Hon. D. R.
Paget, R. T.


Baird, J.
Griffiths, Rt. Hon. James (Llanelly) 
Paling, Rt. Hon. W. (Dearne Valley)


Balfour, A.
Hannan, W.
Palmer, A. M. F.


Bence, C. R. (Dunbartonshire, E.) 
Harrison, J, (Nottingham, N.) 
Pannell, Charles (Leeds, W.)


Benn, Hn. Wedgwood (Bristol, S. E.) 
Hayman, F. H.
Pargiter, G. A.


Benson, G.
Herbison, Miss M.
Parker, J.


Beswick, F.
Hewitson, Capt. M.
Parkin, B. T.


Bevan, Rt. Hon. A. (Ebbw Vale) 
Hobson, C. R.
Pearson, A.


Blackburn, F.
Holman, P.
Popplewell, E.


Blenkinsop, A.
Holmes, Horace
Price, J. T. (Westhoughton)


Boardman, H.
Howell, Denis (All Saints)
Price, Philips (Gloucestershire, W.)


Bottomley, Rt. Hon. A. G.
Hoy, J. H.
Probert, A. R.


Bowden, H. W. (Leicester, S. W.)
Hubbard, T. F.
Proctor, W. T.


Boyd, T. C.
Hughes, Cledwyn (Anglesey)
Randall, H. E.


Braddock, Mrs. Elizabeth
Hughes, Emrys (S. Ayrshire)
Redhead, E. C.


Brockway, A. F.
Hunter, A. E.
Robinson, Kenneth (St. Pancras, N.)


Broughton, Dr. A. D. D.
Hynd, J. B. (Attercliffe)
Silverman, Julius (Aston)


Burke, W. A.
Irvine, A. J. (Edge Hill) 
Silverman, Sydney (Nelson)


Burton, Miss F. E.
Irving, S. (Dartford) 
Sorensen, R. W.


Butler, Herbert (Hackney, C.) 
Janner, B.
Soskice, Rt. Hon. Sir Frank


Callaghan, L. J. 
Jay, Rt. Hon. D. P. T. 
Sparks, J. A.


Castle, Mrs. B. A. 
Jeger, George (Goole)
Steele, T.


Champion, A. J. 
Jones, Rt. Hon. A. Creech (Wakefield)
Stewart, Michael (Fulham)


Chetwynd, G. R. 
Jones, David (The Hartlepools)
Strachey, Rt. Hon. J.


Coldrick, W.
King, Dr. H. M.
Summerskill, Rt. Hon. E.


Collick, P. H. (Birkenhead)
Lawson, G. M.
Thomas, Iorwerth (Rhondda, W.)


Corbet, Mrs. Freda
Lee, Frederick (Newton)
Thornton, E.


Craddock, George (Bradford, S.)
Lever, Leslie (Ardwick)
Timmons, J.


Crossman, R. H. S. 
Logan, D. G.
Usborne, H. C. 


Cullen, Mrs. A.
Mabon, Dr. J. Dickson
Warbey, W. N.


Dalton, Rt. Hon. H.
MacColl, J. E.
Weitzman, D.


Davies, Ernest (Enfield, E.)
McInnes, J.
Wells, William (Walsall, N.)


Davies, Harold (Leek)
McKay, John (Wallsend)
West, D. G.


Deer, G.
McLeavy, Frank
Wheeldon, W. E.


de Freitas, Geoffrey
Macpherson, Malcolm (Stirling)
White, Mrs. Eirene (E. Flint)


Delargy, H. J.
Mahon, Simon
Willis, Eustace (Edinburgh, E.)


Dodds, N. N.
Mallalieu, J. P. W. (Huddersfd, E.)
Wilson, Rt. Hon. Harold (Huyton)


Dugdale, Rt. Hn. John (W. Brmwch)
Mann, Mrs. Jean
Winterbottom, Richard


Dye, S.
Marquand, Rt. Hon. H. A.
Woodburn, Rt. Hon. A.


Ede, Rt. Hon. J. C.
Mellish, R. J.
Yates, V. (Ladywood)


Edwards, W. J. (Stepney)
Mikardo, Ian
Younger, Rt. Hon. K.


Evans, Edward (Lowestoft)
Mitchison, G. R.
Zilliacus, K.


Evans, Stanley (Wednesbury)
Moody, A. S.



Fernyhough, E.
Moss, R.
TELLERS FOR THE AYES:


Fletcher, Eric
Mulley, F. W.
Mr. Wilkins and Mr. Simmons.


Forman, J. C.
Noel-Baker, Francis (Swindon)





NOES


Agnew, Cmdr. P. G.
Grimston, Sir Robert (Westbury) 
Moore, Sir Thomas


Aitken, W. T.
Hare, Rt. Hon. J. H.
Nabarro, G. D. N.


Allan, R. A. (Paddington, S.) 
Harris, Frederic (Croydon, N. W.) 
Nairn, D. L. S.


Amery, Julian (Preston, N.) 
Harrison, Col. J. H. (Eye)
Heave, Airey


Anstruther-Gray, Major Sir William 
Harvey, Ian (Harrow, E.)
Nicholls, Harmer


Armstrong, C. W.
Harvey, John (Walthamstow, E.) 
Nicolson, N. (B'n'm'th, E. &amp; Chr'ch) 


Ashton, H.
Heath, Rt. Hon. E. R. G.
Nield, Basil (Chester) 


Atkins, H. E.
Hill, Rt. Hon. Charles (Luton) 
Oakshott, H. D.


Baldock, Lt.-Cmdr. J. M.
Hill, Mrs. E. (Wythenshawe) 
Ormsby-Gore, Hon. W. D. 


Balniel, Lord
Hill, John (S. Norfolk) 
Orr, Capt. L. P. S.


Barber, Anthony
Hinchingbrooke, Viscount
Orr-Ewing, Charles Ian (Hendon, N.)


Barlow, Sir John 
Hirst, Geoffrey
Page, R. G.


Barter, John
Holland-Martin, C. J.
Peyton, J. W. W.


Bennett, F. M. (Torquay)
Hornby, R. P.
Pitman, I. J.


Bevins, J. R. (Toxteth) 
Hornsby-Smith, Miss M. P.
Pitt, Miss E. M.


Biggs-Davison, J. A. 
Howard, Hon. Greville (St. Ives)
Pott, H. P.


Birch, Rt. Hon. Nigel
Hudson, Sir Austin (Lewisham, N.) 
Powell, J. Enoch


Bishop, F. P.
Hughes Hallett, Vice-Admiral J. 
Prior-Palmer, Brig. O. L. 


Body, R. F. 
Hughes-Young, M. H. C.
Profumo, J. D.


Boothby, Sir Robert 
Hurd, A. R.
Raikes, Sir Victor


Bossom, Sir Alfred 
Hyde, Montgomery
Rawlinson, Peter


Boyd-Carpenter, Rt. Hon. J. A. 
Iremonger, T. L.
Redmayne, M.


Boyle, Sir Edward 
Irvine, Bryant Goodman (Rye) 
Rees-Davies, W. R.


Braine, B. R.
Jenkins, Robert (Dulwich)
Remnant, Hon. P


Bromley-Davenport, Lt.-Col. W. H. 
Jennings, J. C. (Burton)
Renton, D. L. M.


Brooke, Rt. Hon. Henry
Johnson, Dr. Donald (Carlisle) 
Ridsdale, J. E.


Bryan, P.
Johnson, Eric (Blackley)
Rippon, A. G. F.


Bullus, Wing Commander E. E. 
Joseph, Sir Keith
Rodgers, John (Sevenoaks) 


Burden, F. F. A. 
Joynson-Hicks, Hon. Sir Lancelot
Roper, Sir Harold


Butcher, Sir Herbert 
Kaberry, D.
Ropner, Col. Sir Leonard 


Channon, H.
Keegan, D.
Schofield, Lt.-Col. W. 


Chichester-Clark, R.
Kerr, H. W.
Scott-Miller, Cmdr. R. 


Clarke, Brig. Terence (Portsmth, W.) 
Kirk, P. M.
Sharpies, R. C.


Cole, Norman
Lagden, G. W.
Shepherd, William


Cordeaux, Lt-Col. J. K.
Lambert, Hon. G.
Simon, J. E. S. (Middlesbrough, W.) 


Corfield, Capt. F. V.
Lancaster, Col. C. G.
Spearman, Sir Alexander 


Craddock, Beresford (Spelthorne) 
Langford-Holt, J. A.
Stevens, Geoffrey


Crouch, R. F.
Leather, E. H. C.
Steward, Harold (Stockport, S.) 


Cunningham, Knox 
Leavey, J. A.
Steward, Sir William (Woolwich, W.) 


Currie, G. B. H. 
Leburn, W. G.
Stoddart-Scott, Col. M. 


Dance, J. C. G. 
Legge-Bourke, Maj. E. A. H. 
Studholme, Sir Henry


Davidson, Viscountess 
Legh, Hon. Peter (Petersfield) 
Taylor, William (Bradford, N.) 


D'Avigdor-Goldsmid, Sir Henry 
Lindsay, Hon. James (Devon, N.) 
Teeling, W.


Deedes, W. F.
Lindsay, Martin (Solihull)
Thomas, Leslie (Canterbury) 


Donaldson, Cmdr. C. E. McA.
Linstead, Sir H. N.
Thomas, P. J. M. (Conway) 


Doughty, C. J. A. 
Longden, Gilbert
Thompson, Kenneth (Walton) 


Drayson, G. B. 
Lucas, Sir Jocelyn (Portsmouth, S.) 
Thompson, Lt.-Cdr. R. (Croydon, S.)


du Cann, E. D. L.
Lucas-Tooth, Sir Hugh
Tiley, A. (Bradford, W.) 


Duthie, W. S.
Mackeson, Brig. Sir Harry
Tilney, John (Wavertree) 


Eden, J. B. (Bournemouth, West) 
Mackie, J. H. (Galloway) 
Turner, H. F. L.


Elliot, Rt. Hon. W, E.
McLaughlin, Mrs. P.
Turton, Rt. Hon. R. H. 


Emmet, Hon. Mrs. Evelyn
Maclay, Rt. Hon. John
Vane, W. M. F.


Errington, Sir Eric
McLean, Neil (Inverness)
Vickers, Miss J. H.


Fell, A.
MacLeod, John (Ross &amp; Cromarty) 
Vosper, D. F.


Fisher, Nigel
Macmillan, Rt. Hn. Harold (Bromley) 
Wakefield, Edward (Derbyshire, W.) 


Fletcher-Cooke, C.
Maddan, Martin
Walker-Smith, D. C.


Foster, John
Maitland, Cdr. J. F. W. (Horncastle) 
Wall, Major Patrick


Galbraith, Hon. T. G. D.
Maitland, Hon. Patrick (Lanark) 
Ward, Hon. George (Worcester) 


George, J. C. (Polish)
Manningham-Buller, Rt. Hn. Sir R. 
Ward, Dame Irene (Tynemouth) 


Gibson-Watt, D. 
Markham, Major Sir Frank
Waterhouse, Capt. Rt. Hon. C. 


Glover, D.
Marlowe, A. A. H.
Whitelaw, W. S. I. (Penrith &amp; Border) 


Gough, C. F. H. 
Mathew, R.
Williams, Paul (Sunderland, S.) 


Gower, H. R.
Maude, Angus
Williams, R. Dudley (Exeter) 


Graham, Sir Fergus 
Mawby, R. L.
Wilson, Geoffrey (Truro) 


Grant, W. (Woodside)
Maydon, Lt.-Comdr. S. L. C. 
Woollam, John Victor


Grant-Ferris, Wg Cdr. R. (Nantwich) 
Milligan, Rt. Hon. W. R.



Green, A.
Molson, Rt. Hon. Hugh
TELLERS FOR THE NOES:




Mr. Wills and Mr. Godber.


Question put and agreed to.

11.15 p.m.

Mr. H. Macmillan: I beg to move, That further consideration of the Bill, as amended, be adjourned.
We have made good progress today. There is every indication that we have got well ahead with the task we set ourselves. I would thank the House for the co-operation it has given. I think

we can adjourn now and hope to finish our labours at a reasonable hour tomorrow.

Bill, as amended (in Committee and on re-committal), to be further considered Tomorrow.

Orders of the Day — MENTAL HOSPITALS (INVOLUNTARY PATIENTS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Godber]

11.18 p.m.

Dr. Donald Johnson: I rise to raise the question of the admission of involuntary patients to mental hospitals. I must apologise to the Parliamentary Secretary if once again in a short space of time I have kept her late in the House. As she knows, occasions to debate the health services, or any aspect of them, seem to be few and far between. The exact occasion of this debate arises from the Answer to my Question last Monday concerning the admission of certified patients to mental hospitals, which revealed what seemed an alarmingly high figure of some 20,000 people annually being put into mental hospitals against their will, only some 15 per cent. of that number having been under outside observation in hospital beds.
In other words, some 17,000 people are swept up, if I may use that word, in this way, mainly on summary reception orders, and detained in mental hospitals for an indefinite period up to a year. This is done on the opinion of two or three people who, though of official and professional status and empowered to sign certificates, are as liable to error as the remainder of mankind. This seems to be an extraordinarily large number of people in such a liberty-loving country as ours, to be detained on no other criterion. Such certificates are really the only criterion which warrant these detentions.
In reply to my supplementary question last week, my right hon. Friend stated that the figure was not as large as all that, and that, in fact, a further 20 per cent. of patients, representing about 4,000 people, were annually placed in observation wards of mental hospitals.
Before proceeding further, I wish to ask a further question on this point. If my hon. Friend cannot give me the answer tonight, or if she has not the figures with her, perhaps she could let me know at some future date what percentage of the number of those placed in observation

wards of mental hospitals were already certified under summary reception orders before they went to hospital, or whether they were admitted merely under three-day emergency orders, and, if so, what percentage of them were discharged from observation wards at the termination of such urgency orders.
The reason I ask this is that it is my impression, rightly or wrongly, that once a person is in a mental hospital his or her transference from one ward to another is, on occasion, something of a formality and is by no means the same as if the patient were moved from a general to a mental hospital.
To return to my main point, the matter of these 20,000 people annually entering mental hospitals is a vast human problem, and one with which I hope to deal later. My first intention is to convince my hon. Friend and also my right hon. Friend the Minister that, apart from anything else, the way in which people are placed in mental hospitals is really not particularly good business from their point of view.
The real question at the moment is how we can solve the problem of our overcrowded mental hospitals. According to the figures given by my hon. Friend's Ministry at the end of 1954. 140,487 patients were occupying bed space authorised for only 121,555 patients, which represented an overcrowding of 15·6 per cent. There are, of course, two ways of solving the problem. One is by building more hospitals but that, as we know, in the present economic situation is practicable only to a limited degree, and the other and far more practicable and economical way is by exercising far more discrimination than at present over admissions.
This can be done in the way I have suggested, by the establishment of observation wards in general hospitals in which patients can be viewed in surroundings as detached as possible from mental illness and where they can be seen by general physicians who are not quite so preoccupied with their own speciality as are psychiatrists. Such surroundings would provide a respite during which the patient could, perhaps, surmount an acute crisis and resume his or her place in the community without having acquired the stigma of having been an inmate of a mental hospital


which, whatever may be said, is quite inseparable from such treatment.
What I have said is confirmed by the experience in the observation wards in the L.C.C. area. According to the figures supplied by the L.C.C. in their evidence to the Royal Commission, there were 4,746 patients admitted into the observation wards in the L.C.C. area during 1953. Out of these, 1,274, or almost exactly a quarter, were discharged at the end of the 17-day observation period, while a further quarter were moved as voluntary patients rather than involuntary patients.
To keep to the point, concerning the quarter who were discharged, it is clear to anyone who has even the most superficial acquaintance of the ways of mental hospitals and the time factor which operates within their walls that these people were discharged very much quicker than they would have been once they were entangled in the mental hospital machine. It is equally clear that if a quarter of the admissions to mental hospitals in the country can be cut down, even if only with short-stay cases, it will go some way to solving this problem of overcrowding. Indeed, it seems to me that this policy offers a dazzling prospect to my right hon. Friend in that at a comparatively small cost he can solve the problem of overcrowding in mental hospitals.
I will, however, turn from this splendid vision to the more sombre human angle. It is probably one of the most distressing experiences that anyone can undergo to be forcibly put into a mental hospital, and we must dispense with euphemisms for a moment and call a spade a spade, because force is the ultimate sanction of putting these unfortunate people into mental hospitals.
As I have said, it is a most unfortunate experience to be put into a mental hospital, to be conducted there by a local authority official and perhaps also a policeman if there has been any show of recalcitrance. Such an experience as this is hardly conducive to the improvement of mental health which, after all, is supposed to be the object of the exercise, even in the best of circumstances. It behoves a civilised community to soften the blow and to ensure that, where detention is necessary, not only is justice done but also

that it is seen to be done, and this is far from being the case at present.
The law of lunacy is antiquated, muddled and obscure. The Lunacy Act, 1890, has been amended and re-amended in such a way that practically nobody understands it at present, even the cleverest and most able people being at sea with it. The hon. Lady the Parliamentary Secretary may perhaps deny this, but I hope she will pardon me if I say that she is herself one of the most outstanding instances of this. We all admire her competence and grasp of her Department's work, yet when she comes to talk of the law of lunacy she seems to me to be at sea with the rest of us.
On 19th November, 1952, when she spoke in the debate on geriatrics, in reply to the accusation of over-zealous certification of elderly people, she said that patients can only be certified first on medical examination and then on the order being signed by two justices. I hope she will excuse me correcting her when I point out that, according to the 1953 figures, there were some 20,000 people put into hospital by summary reception order and only 350 by petition. A summary reception order requires the signature of only one justice—any justice who is available.
I think we can say that the Section 16 procedure, under which most people are sent into mental hospitals, itself is a direct inheritance from the Victorian Poor Law arrangements which were incorporated into the Act of 1890, and it is characterised by the same lack of humanity. This can only be softened properly with alteration of the law—and, of course, it is not proper in a debate such as this that I should make a suggestion in that connection—in such a way as I have suggested, namely, by the establishment of proper observation wards such as those which are working very successfully in the L.C.C. area and which could be made to work in other places equally well, so that there would be proper medical observation, proper diagnosis, before this dire and rather terrible step is taken.

11.30 p.m.

The Parliamentary Secretary to the Ministry of Health (Miss Patricia Hornsby-Smith): The hon. Member for Carlisle (Dr. D. Johnson) has, I know, a very great interest in this topic, but I


think that he has done less than justice to the great work that has been done towards removing the stigma from our mental hospitals. In fact, the whole tenor of the debate has unfortunately been to put back the stigma which we have worked tremendously hard to get removed.
The very substantial increase in the number of voluntary patients going into hospital over the last years, from 51 per cent. only of voluntary patients in 1946 to 75 per cent. in 1955, shows that there is indeed a new outlook on our mental hospitals and that great efforts have been made to remove any sense of stigma when people desire to get treatment and care in our mental hospitals.
I should first like to correct a misconception which has grown up as a result of reference to Section 20 accommodation as "observation wards." Section 20 of the Lunacy Act, 1890, as amended, says:
If a duly authorised officer of the local health authority or any constable is satisfied that it is necessary for the public safety or the welfare of a person alleged to be of unsound mind with regard to whom it is his duty to take any proceedings under this Act that the said person should, before any such proceedings are taken, be placed under care and control, the officer or constable may remove the said person to any hospital or part of a hospital vested in the Minister (whether a mental hospital or not) which is designated by the Minister for the purposes of this Section, and the person in charge of the said hospital or part shall receive and detain the said person therein, but no person shall be detained under this Section for more than three days.
There is no mention of "observation". A person is admitted to Section 20 accommodation when it is necessary for the public safety or for his welfare to put him under care and control while the justice, who in such cases has to be notified, puts into operation the steps required by the Act to enable him to inquire into the mental condition of the patient. The purpose is not to provide a period during which the mental condition of the person shall be observed.
The suggestion that unless a person is dealt with initially under Section 20 he is deprived unfairly of his liberty by being sent to a mental hospital as a certified patient, is really not correct. Whether a person is certified in a Section 20 hospital, or in his home or anywhere else, the procedure is precisely the same.

The case is notified to a justice; the justice calls in a medical practitioner to examine the patient. On the basis of the medical opinion the justice makes up his mind. He may make an order or decline to do so. Even when the making of an order would be justified he may be content to allow the patient to go to the care of a relative or friend, if he is satisfied that proper care will be taken of him.
The use of Section 20 does, of course, mean that a patient has been in medical charge for a period before an order is made, but a certificate for the purposes of the order is based on facts indicating insanity observed by the certifier at the time of his examination. The certifier may add facts communicated to him by others, such as nurses and relatives, about the patient's behaviour, but a certificate which included only such facts is not valid for the purposes of an order, and the Act expressly says so.
It will, therefore, be seen that "observation" of a patient in a Section 20 case is really irrelevant to the making of an order. I would emphasise that the decision whether an order shall be made rests entirely with the justice and with no one else.
I should also like to point out that practically every patient who is certified outside a Section 20 hospital has been under medical observation and treatment for varying periods previously, either by a general practitioner or through attendance at out-patient clinics.
The primary purpose of Section 20 is to provide hospitals to which persons who need to be placed under control as well as given treatment without delay can be removed without formality beyond the action of the duly authorised officer. In other words, it is for cases of emergency where prompt removal of a patient has got to be made.
Before the National Health Service Act, patients dealt with under Section 20 could only be sent to Public Assistance institutions. In those days the Section was specifically intended for use in urgent cases. It was, in fact, side-noted:
Removal of person of unsound mind to a public assistance institution in urgent cases.
I realise that professional opinion about the use of Section 20 has been very divided for a considerable number of


years, but I think I can give my hon. Friend some of the figures for which he asked. There were at the end of 1954, 71 mental hospitals, 43 mixed hospitals and 26 general hospitals designated to which persons could be sent compulsorily under Section 20. Since 1949 the number of mental hospitals used for the purpose has increased from 67 to 71, and the admissions increased from 2,072 in 1949 to 7,141 in 1954. For other hospitals, the number of units had fallen from 118 to 69, but the number of admissions increased from 16,468 to 17,329.
The number of Section 20 cases admitted to all these hospitals in 1954 was 24,470, of which 7,141 were admitted to mental hospitals, 7,638 to mixed hospitals and 9,691 to general hospitals. There is no clear evidence that the types of patient sent to the three kinds of hospital differed very much. For the most part, each had its own collecting area, and there seemed to be little overlapping.
In the mental hospitals 82·2 per cent. of the Section 20 patients remained in hospital, but only 24·8 per cent. of the admissions were, in fact, certified. The corresponding figures for the other hospitals are 59·9 per cent. sent to mental hospitals and 35·1 per cent. of the total admissions were certified. Thus, more than half the patients sent from general hospital Section 20 wards to mental hospitals were sent as certified patients, whereas of those admitted in the first place to Section 20 wards in mental hospitals only one quarter continued under legal detention. It therefore seems that the proportion of voluntary patients is higher resulting from admissions into the mental hospitals than from admissions into the other hospitals.

Mr. J. E. S. Simon: Can my hon. Friend say why that should be so?

Miss Hornsby-Smith: That is a matter of medical controversy, and I would rather not give an opinion on it at this stage.
Of the total Section 20 admissions, 12·7 per cent. were discharged from the mental hospital wards within the detention period, whereas the discharge rate from those of the mixed and general hospitals was 33·1 per cent. The differing

results indicated by these percentages support the view—the point that I made just now—that many patients admitted direct to mental hospitals are willing to stay on as voluntary patients.
My hon. Friend suggested that the use of Section 20 accommodation in other than mental hospitals reduces the number of admissions to mental hospitals, particularly of certified patients. That is not really borne out by the facts. As I have already mentioned, more than half the patients sent from Section 20 accommodation in general hospitals to mental hospitals in 1954 were certified whereas of those admitted in the first place to Section 20 accommodation in mental hospitals, only one quarter remained as certified patients.
I feel that this is largely the result of the new outlook which we have striven so hard to get in our mental hospitals and of the upgrading and the improved conditions in many of the hospitals which have resulted in removing the stigma formerly attaching to them and has made people look upon entry into a mental hospital as entry into a specialist hospital for the treatment required for mental illness comparable to their going into a general hospital for physical illness. It is important that nothing should be done to encourage the public to revert to the days when a stigma attached to mental hospitals. The facts that 75 per cent. of the patients go in as voluntary patients, that the rate of turnover is increasing every year, that many patients are discharged within two months, are trends in the right direction which hon. Members on both sides of the House will most heartily support.
As to my hon. Friend's suggestion that we could save beds, a bed, whether in a general hospital or a mental hospital, will cost money, and it will not be easier vastly to extend observation wards than to continue with the deliberate priority hospitals, where 3,000 beds have in the past few years been included in the regional hospital boards' programmes. A like number has in the past few years been included in the regional hospitals boards' programmes.
In any event, the Royal Commission on the Law Relating to Mental Illness, now sitting, can be expected to deal in its Report with all the procedures for


compulsory admission, including procedures necessary in emergency circumstances. The House will appreciate that I obviously cannot anticipate what this important Commission, at present taking its evidence and preparing its Report, will say. Certainly my right hon. Friend will give that most important document the fullest possible consideration when it is received. It would be premature to anticipate any suggestions which it may make.
I should like to assure my hon. Friend the Member for Carlisle that there is no lack of sympathy with these patients. Our desire is to see that they get early treatment wherever possible. There has been considerable extension of domiciliary work by local authorities and people can have psychiatric advice and treatment at home; there have also been

extensions in annexes for the old in order that they need not be certified if they become a little confused and no longer capable of staying in normal Part III accommodation.
The whole trend has been to help people to avoid becoming certified. I do not think that the patients' best interests would be served by reducing in mental hospitals the importance of voluntary treatment or by moving away from the new approach whereby people look upon mental hospitals as somewhere where they can go for treatment and where only in absolute necessity will they be certified.

Adjourned accordingly at seventeen minutes to Twelve o'clock.